European integration and external constraints on social policy; is a Social Charter necessary

This article examines the conditions under which social policy would be constrained by European economic integration and assesses whether a Social Charter is needed. It provides a framework for interpreting the ’principle of subsidiarity’, examines the potential for a direct effect of social benefits on the movement of people within the EC, investigates the impact of the taxes used to finance social policy on the location of businesses and people and the incidence of these taxes. As the degree of labour mobility in response to differences in real wages between EC countries is demonstrated to be crucial in deciding whether a Social Charter is necessary, a substantial part of the paper examines the evidence on the responsiveness of labour mobility, and it suggests little need for a Social Charter. The completion of the single European market after 1992 could have implications for the conduct of social policy in member countries of the European Com-munity (EC). In particular, more integrated capital and labour markets could limit member countries’ freedom of action in social policy. Limitations could arise because businesses are mobile in the longer term, and an integrated Euro