New study

Chamber of Labor looks at the benefits of bureaucracy

The word "bureaucracy" has become a fighting word.

(Bild: stock.adobe.com)

How much does bureaucracy depress a country's economic performance? States, economies and companies have been arguing about this for a long time. The Chamber of Labor (AK) is now warning against the undermining of social and environmental standards.

Particularly since the late 1990s and early 2000s, EU legislation has been increasingly perceived as a burden, especially for companies, according to the study "EU Better Regulation" by Brigitte Pirchner from Södertörn University in Sweden, published by the Chamber of Labor.

There are more than 23,000 laws in the EU. By comparison, there are around 5,000 in Switzerland. The scientist analyzes the EU Commission's agenda for better regulation and the measures that have changed over time.

"With all due understanding for the difficult economic situation of industry, we must be careful that we do not actually reduce democracy by reducing bureaucracy," said AK Director Silvia Hruška-Frank. "Much of what is being proposed does not make economic sense either." She refers, for example, to a proposal by the EU Commission to reduce reporting obligations for animal diseases. In addition, far too many companies would be classified as small and medium-sized enterprises (SMEs).

Does the EU have an SME problem?
With regard to the possible undermining of social standards that she has identified, the researcher writes that the Commission described a new EU law to protect workers from asbestos as a burden for companies in a report on the administrative burden in 2023. At the same time, the benefits of preserving workers' health, continued employment and their contributions to taxes and social security were completely disregarded.

Since the time of Commission President Ursula von der Leyen, almost all companies have been defined as SMEs. The bureaucracy problem is justified solely by the fact that EU legislation is too complex and costly for companies, especially SMEs.

However, the definition of SMEs is so broad that today 99.8 percent of all companies fall into this category. Costs are the central issue. As a result, political solutions are practically only aimed at costs, "while the value of a regulation is disregarded", writes Pirchner.

Signa bankruptcy as a warning 
Overall, SMEs are already "frequently exempt from control and reporting obligations". This was also the case for companies in the fallen Signa Group around René Benko, which were "frequently exempt from control and reporting obligations". The billion-euro Signa bankruptcy is not only the largest bankruptcy in Austrian history, but also the largest insolvency case in Europe's real estate sector.

The Commission has announced that reporting obligations for companies will be eased beyond 2024, even though the authority has just been restaffed. "However, these measures could lead to corporate interests taking precedence over social rights, which would jeopardize social systems and increase the risk of precarious working conditions throughout the EU," writes Pirchner. Socio-political goals are not the focus. The deregulation forced by von der Leyen is also clearly in contrast to von der Leyen's Green Deal, the study states.