Luxembourg's Social Model

The 'Tripartite' or 'Luxembourg model' is based on an institutionalised and continuous dialogue between the government, employers and unions on important economic and social issues, aimed at finding a consensus.

History

The 'Luxembourg model' was implemented in the 1970s, following the severe steel crisis that threatened to deeply shake foundations of Luxembourg society.

The Law of 26 July 1975 authorised the government to implement measures intended to prevent redundancies due to a slowdown in the economic cycle and ensure the maintenance of jobs. At the same time it created the Economic Committee in its 'Tripartite' composition, responsible, among others, for closely monitoring the evolution of the economic situation and making a report to the government once a month.

In 1977, due to the worsening problems in the steel sector, the government brought together a 'Tripartite Steel Conference', which developed an action plan for continued economic growth and full employment.

The Law of 24 December 24 institutionalised a 'Tripartite Coordination Committee' to be convened in case of a declining economic and social situation.

On 19 March 1979 the 'Tripartite Coordination Committee' reached a first agreement concerning the restructuring and modernisation of the steel industry.

The success of this first experience of the Tripartite 'government-employers-labour', which helped avoid the dismissal of thousands of steel workers, is indisputable. On the one hand, the Luxembourg steel industry could be maintained and modernised to meet the requirements of a modern steel industry. On the other hand, by the implementation of a considerable number of specific social measures, mass unemployment could be avoided.

The Grand Duchy managed to restructure its steel industry in 1978. And this to a stunning success, since ARBED eventually became the third largest steel producer in the world. After mergers, ARBED became Arcelor and then ArcelorMittal, based in Luxembourg, which meanwhile has become the world's largest steel producer. It is through the development of the steel industry that the Grand Duchy laid the foundations of its current economic success. The Luxembourg financial centre has in turn had a remarkable growth, strengthened by the development of communication technologies.

Meanwhile, sectoral tripartites emerged, and the search for consensus on economic and social issues in such a consultative body has become the norm.

Conceived as an instrument of crisis, limited in time and to one sector (steel), the tripartite has become a kind of institutionalised and permanent platform for dialogue.

What about nowadays?

Nowadays, four institutions guarantee a permanent social dialogue: the Economic Committee, the Economic and Social Council, the Tripartite Coordination Committee and the Tripartite Steel Conference.

Economic Committee

Established in 1975, the Economic Committee (Comité de conjoncture) consists of three ministers and representatives of professional organisations of employers and employees. This committee convenes monthly under the chairmanship of the Minister of the Economy and/or the Minister of Labour and Employment. Its role is to take into account the situation of companies forced to resort to short-time working arrangements and to propose, if needed, compensatory payments to companies resorting to short-time work. The Economic Committee can also decide to launch measures of 'extraordinary works of public interest'.

The Economic and Social Council

The Economic and Social Council (Conseil économique et social, CES) is composed of employer, employee and government representatives. This body of social consultation advises on any legislative or regulatory action relating to professional sectors and the entire national economy.

Tripartite Coordination Committee

Established in 1977, it brings together representatives from the government (Minister of Finance, Minister of the Economy, Minister of Labour and Employment), employers (Chamber of Commerce, trades) and labour (trade unions). The Tripartite Coordination Committee is presided by the Prime Minister. Its function is to reach consensus on important economic and social issues. Press releases concerning the Tripartite Coordination Committee are published on www.gouvernement.lu.

Tripartite Steel Conference

The Tripartite Steel Conference is a direct consequence of the crisis in the steel sector, the mainstay of the Luxembourg economy until the late 1980s. It is only relevant to the steel industry. The negotiations in this conference have prevented major problems of unemployment, by putting in place a system of programmed and progressive reduction of employment in the steel industry, particularly through natural turnover and the use of early retirement at the age of 57 years.

  • Updated 28-04-2015