Graph of the day: people available to work but not seeking a job.
The graph below shows that Italy might have serious labour supply rigidities, in this case defined, operationalized and measured as discouraged ‘unemployed’. But Greece? Forget it.
Considering the level of ‘normal’ unemployment in Greece – an unprecedented 25+% – one of the indicators of broad unemployment (people available to work but not seeking, not counted as ‘normal’ unemployed) is surprisingly low. Normally, one would, considering the level and tenacity of Greek unemployment, expect that many unemployed would just quit searching for a job – but not in Greece! Italy, however, does boasts a very high level of these discouraged non-seekers, a level which, despite labour market reforms (lauded by the usual suspects) actually increased quite a bit, from 12.2% in the third quarter of 2012 to 13.1% in the third quarter of 2013 and 14.2% in the third quarter of last year. I have to spell that out: f-o-u-r-t-e-e-n-p-o-i-n-t-t-w-o-p-e-r-c-e-n-t. Which alone would already be a very high rate of unemployment but which has to be added to normal unemployment which, in Italy, is about 12% (measured as a % of the ‘active’ population between 15 and 74). Which leaves Italy with broad unemployment which is about as high as in Greece…
What does this mean? On the macro level it’s easy: a massive amount of people willing to work are not working, which is a massive personal, social as well as an economic waste. Millions of people do not have the lives they aspire – it’s that simple. On the micro level it’s less easy and one needs in-depth statistical as well as observational information about the Greek and the Italian labour markets to explain this difference: why do unemployed Greek search for a job while many unemployed Italians don’t (at least say this – the data are based upon inquiries). Be that as it may – the Greek data fly in the face of the neoliberal social engineers who, as their basically non-monetary models exclude involuntary unemployment as a variable, are only able to explain unemployment with the mantra ‘rigidities, rigidities, rigidities’, therewith showing that they do not understand that the very nature of monetary market contracts (and therewith money..) is to cope with fundamental uncertainty by imposing or at least trying to impose at least some ‘rigidity’ (i.e. predictability) upon this fickle world of ours as Fieke van der Lecq argues in het thesis. A monetary ‘price’ (wages, interest rates, debt levels, whatever) is a rigidity by nature and design… But indeed, such ideas do not explain the difference between Italy and Greece and it might well be, also for people from the left, be worthwhile to investigate (and change) what withholds Italians from searching for a job. That won’t solve Italian unemployment, of course, but it will bring the extent of the problem out into the open. For Greece, however, all talks about labour market reforms and increasing the pension age are just ego-saving distractions meant to please bureaucrats in Brussels. Before 2009 the Greek economy was pretty dynamic, just like it’s labour market while the same can’t be said for Italy. Which means that Italy might really have rigidity problems (which, as stated, have however not been solved by the recent labour market reforms – to the contrary!). The real problem in Greece is, surely when we consider the data of the graph above, a lack of spending and lack of jobs. And, of course, the ego’s of the Brussels based social engineers.
Aside: the longest run rigid prices I know are the Groningen ‘beklemmingen‘ land rents, which haven’t been changed for about 350 years. But even price tags in supermarkets are a sign of this kind of rigidity. Asset markets, which are often characterized by auctions, are an exception but the point is of course that assets already exist, while in the case of produced goods and services (production takes time) implicit and explicit contracts stipulating temporal rigidities are the rule