Social & economic policy in the age of AI & geopolitical uncertainty

Industrialised economies such as the European Union (EU) and the UK face mounting pressures on their social models: ageing populations, labour market transformation, rising fiscal constraints, geopolitical uncertainty, and fast-moving technological change, including Artificial Intelligence (AI). What should social policy look like when jobs, risks, and public finances are changing at the same time?

Mario Nava (Director-General of the European Commission’s Directorate-General for Employment, Social Affairs and Inclusion) sat down in conversation with Catherine Barnard (Professor of EU Law and Employment Law, Fellow of Trinity College, Cambridge, and Senior Fellow at UK in a Changing Europe) to bring together senior policy and academic perspectives on the matter. Professor Oana Stefan (Director of the Centre of European Law) chaired the discussion.

The event examined whether current labour standards, employment law, and welfare systems are fit for rapid change, and what reforms are needed to ensure fair, sustainable social protection amid labour market transformation, rising inequality, and evolving European and international roles. A few takeaways emerged from the event.

Despite a challenging geopolitical situation and the rise of AI in the last few years, the unemployment rate in the EU has decreased significantly. However, the number of people below the poverty threshold is not decreasing as much, which proves to be a continuing challenge. At least for the time being, AI is not replacing entire jobs but only specific tasks within a given job. Although this phenomenon is admittedly changing the nature of certain jobs, it has not resulted in any systematic layoffs.

To further reduce unemployment, the EU is committed to policies that maximise the activation of workers and their cross-border mobility. The European Pillar of Social Rights People has proven more active and successful than expected, with concrete results being achieved. One example is the Platform Workers Directive (Directive (EU) 2024/2831): beyond its often-discussed provision on the presumption of employment relationship with digital labour platforms, the directive contains advanced (but often overlooked) protections for workers subject to algorithmic management and automated decision-making.

The EU policy-making process is not always streamlined, though. During the discussion, the panellists noted that further trilogue negotiations on the revision of EU regulation on the coordination of social security systems are due soon. It is hoped that these will yield a final compromise text after a decade-long gestation, to bolster cross-border labour mobility. The speakers also pointed out that in the age of AI, the limited coordination between EU social legislation and EU digital regulation (notably the AI Act and Digital Services Act) should be improved.

From a legal standpoint, the limits of EU competences and the need for appropriate legal bases for regulation can create roadblocks for the development of EU social policy. Sometimes these result in challenges against EU legislation before the Court of Justice of the European Union (CJEU), such as the recent case C‑19/23 Denmark v Parliament and Council (Adequate minimum wages) on the Directive on Adequate Minimum Wages (Directive (EU) 2022/2041). There is room for cautious optimism, though: the CJEU seems to adopt a pragmatic approach. Indeed, while it struck down specific provisions that lacked a valid legal basis, it did not annul the entire directive. This “Solomonic” solution preserves advancements in social legislation while still policing the boundaries of EU competences.

This event was supported by the European Union through the Jean Monnet Centre of Excellence on Next Generation EU–UK Relations. The judgments and views expressed in this article are solely those of the individual author and do not represent those of the speakers.