Home > Uncategorized > Über-unemployment in the Eurozone: a question of design

Über-unemployment in the Eurozone: a question of design

Unemployment

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.

darling

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)

  1. guest
    February 13, 2015 at 7:46 pm

    “Portuguese emigrants tend to go to Brazil and Mozambique”

    Actually, Angola is a major destination — the oil boom required lots of somewhat qualified workers, for which Portuguese seemed to be fit.

    Which leads to the following question: what will happen to unemployment in Portugal once all those emigrants lose their jobs because of the oil crash and return to Europe?

  2. Statistics Ruckery
    February 14, 2015 at 8:05 am

    How does these statistics change with people moving within the Union? Say an Estonian move to the Czech republic or an Italian to Romania? Is one person deducted from the unemployment in the first country and reappear as an employed person in the second. If the person later gets unemployed does he/she Count in the second country or the first country?

    • merijnknibbe
      February 14, 2015 at 8:23 am

      If the person is ‘legal’ and searching for a job he or she counts as unemployed. Considering the source of the statistics in at least some countries (questionaires, not administrative ledgers) even ‘illegals’ may count as unemployed when the answer that they do not have a job, are searching etc. But in the Portuguese case there will no doubt be quite a bit of statistical ‘noise’ when it comes to remigrants (consider the case of somebody who went back for a vacation in Portugal – but is suddenly forced to stay there).

  3. Statistics Ruckery
    February 14, 2015 at 8:06 am

    Is there a risk that both countries fine tune their statistics by not reporting the person as unemployed in either country?

  4. Sad
    February 15, 2015 at 8:39 am

    At this point only Finland and Italy have raising unemployment.

    Here in Finland situation have been bad ever since 1990’s depression. What really sucks is that that number is just nation wide average, and here are regions with over 20% unemployment. Good luck trying to find job if you happen to live there!

    For some reasons Finnish leaders dont care about unemployment and are very keen on austerity. Maybe it is because they think we are close to full employment with NAIRU estimates higher than 5%, god knows where is the upper limit. I mean, I have heard that opinion that we a close to full employment and there is not room for stimulus anyway.

    And people blame the unemployed for the unemployment and unemployed largely blame themselves. I think that is why we are seeing so much violence in this society. People taking the lives of their own, their family or somebody immediately around them. There is just so much blame and self-blame going on people get frustrated and agitated.

  5. Sad
    February 15, 2015 at 8:50 am

    With these never-ending output gaps you would think somebody would have come up with some clever work sharing plan to distribute work and free time more evenly. After all there are people doing long workweeks even when unemployment remains high, and working people in general want reductions in working time. But it is an insane world we are living in.

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