Über-unemployment in the Eurozone: a question of design
It’s always difficult to explain the glaring obvious. But let’s give it a try: whatever kind of rigidities may characterize the Spanish or Greek or Baltic labour markets there is NO WAY the sudden, fast and unprecedented increase of unemployment after 2007 can be explained by these rigidities – if only because all these countries knew decreasing unemployment and an increasing number of jobs before the crisis. At this moment, unemployment in Ireland, Portugal and the Baltics is declining quite fast. But no: this is not caused by post 2008 structural reforms leading to higher rates of job creation and therewith a decline of unemployment once the crisis had, finally, bottomed out. Structural reforms may have led to higher rates of emigration or to people leaving the labour force and therewith to lower unemployment. But net job creation in these five economies – each one of them an austerity darling! – was pretty dismal, once the financial crisis had run it course (graph 2). By the way – Portuguese emigrants tend to go to Brazil and Mozambique while Irish emigrants tend to go to Australia and the USA, which is of course a language thing. And a genuine cultural rigidity. Which is not easily changed. Remarkably, in the USA, where such cultural differences are smaller, much more aggressive monetary and fiscal policies are needed to keep unemployment in check than is even possible in the Eurozone. Which means that periodic long-term episodes of über-unemployment (say: >15%) will be a characteristic of the Eurozone for quite some time to come. That’s the situation Syriza tries to change, small step after small step, towards a better Eurozone.
Some inductive highlights:
* All the fast and large unemployment increases (including the Finnish one) coincided with financial crises
* Countries like Poland, which were relatively insulated from the 2008 crisis, did show a much more favorable development of unemployment as well as employment
* In a very long-term perspective, unemployment rates of 20% and more are rare exceptions (but the Eurzone seems to be and exception to this rule and to produce such rates)