CWS 3.0: September 7, 2011 - Vol. 3.23

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Europe: High Unemployment Persists

High unemployment in Europe remains one of the more intractable problems politicians are trying to solve following the global financial crisis. It is also a more recent problem. Until the end of the 1960s, unemployment was actually very low in Europe (at just over 2 percent) and economists marveled at the "European unemployment miracle." The miracle came to an end in the 1970s, when unemployment began to rise — it kept increasing through the 1980s. Since then, unemployment levels have ebbed and flowed, though it’s never approached the low levels of the 1960s.

More recently, European unemployment levels peaked in 2010 and despite considerable political effort, they have not come down much since. The collective unemployment rate among the European Union member countries* was 9.5 percent in July 2011, down slightly from 9.7 percent recorded a year earlier and unchanged from June 2011. This compares to the U.S. unemployment rate of 9.1 percent in July. While the U.S. and EU rates are not vastly different from one another, the consolidated number for the EU masks a wide disparity among its 27 member states.

‘Dramatic Crisis’
Not surprisingly, the most severe levels of unemployment are being experienced in Portugal, Ireland, Greece and Spain, where much of Europe’s debt problems also lie. Spanish unemployment currently stood at a very disturbing 21.2 percent in July 2011, while Greece, Ireland and Portugal struggle with rates of 15.0 percent, 14.5 percent and 12.3 percent, respectively.

In March 2011, the outgoing president of the Association of Large Temporary Employment Agencies (Agett), Francisco Aranda, said, "Temporary employment is part of the solution of the dramatic crisis in the Spanish labor market. The human element of the high unemployment levels is of particular importance to me because losing your job in Spain unfortunately continues to be a tragedy."

Across Europe, there is also a difference in outcomes for men and women. Between July 2010 and July 2011, the unemployment rate for males fell to 9.3 percent from 9.6 percent, while the female unemployment rate remained unchanged at 10.4 percent.

Perhaps a bigger concern from a social perspective is the number of young people out of work. In July 2011, 5.1 million people under age 25 were unemployed in the EU27, translating to a youth unemployment rate of 20.7 percent.

Eurostat estimates that 22.7 million men and women in the EU were unemployed in July 2011, slightly more than the entire population of Romania. (Actually, Romania’s unemployment rate of 7.3% is quite respectable compared with its European neighbors.)

Bright Spots
There was some good news in the latest statistics. Compared with a year ago, the unemployment rate fell in 16 member states, with the largest drops observed in Estonia (to 12.8 percent in the second quarter of 2011 from 17.9% a year ago), Latvia (16.2 percent in the first quarter of 2011 from 19.9 percent in the 2010 quarter) and Lithuania (15.6 percent in the second quarter from 18.2 percent in 2010). And we shouldn’t overlook the fact that some member states have managed to maintain very low unemployment rates throughout this crisis, notably Austria (3.7 percent), the Netherlands (4.3 percent) and Luxembourg (4.6 percent).

Another positive note was the progress being made by the economic powerhouse of Germany, according to the latest data from the German Federal Labour agency (BA), whose statistics are always one month ahead of Eurostat’s. In August 2011, unemployment in Germany was down by  238,000 to about 2.95 million — or down to 7.0 percent from 7.6 percent in August 2010. BA President Frank J. Weise, said of the August data, "The economic boom has lost some momentum but the developments in the labor market are still positive."

While there are some glimmers of hope, the reduction of public debt is the number one economic priority among fiscally conservative political leaders in Europe; the resulting reductions in public spending have done nothing to improve job growth. With a generation of school-leavers left stranded (in Spain, 63 percent of 16 to 19 year olds are unemployed), the long-term social consequences of the crisis is anyone’s guess.

*Member states of the EU: Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom.

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