Home > Uncategorized > Normal and broad unemployment in Portugal

Normal and broad unemployment in Portugal

Portugal

In Portugal ‘normal’ unemployment (people without a job, immedeately available for work, actively seeking) is going down. Which is a good thing. But it is not the whole story. Broad unemployment, consisting of people who are without paid work but not immedeately available and/or not actively seeking as well as underemployed part time workers,  is hardly going down. While it did increase quite a bit after 2008.

This is highly relevant for economic policies which use ‘normal’ unemployment to gauge the output gap or the level of unemployment which is high enough to prevent wage increases (the so called NAWRU, economists do calculate such variables, to enable central banks to increase unemployment before wages start to increase). And it is of course even more relevant for the million of people who suffer from unemployment. There is much more slack in the Portuguese economy than indicated by ‘normal’ unemployment data and there are much more people in need of work and income than indicated by ‘normal’ unemployment data. Economists should take notice.  And the elephant in the room: European governments are failing their people on an even more massive scale than already indicated by the very elevated levels of ‘normal’ unemployment. Did I mention that the EU government in Brussels wants the Portuguese government to cut spending (while it does not press Germany to increase spending, despite its still massive current account surplus and a level of employment growth which, at 1%, is clearly below potential?).

Technical detail: the sudden increase in broad unemployment indicated in the graph is entirely caused by an increased in involuntary part-time workers, it might be related to the stagnation of normal unemployment around the same time and employers who did not lay off people as the anticipated new rules enabling temporary part time work.

For this post I’ve cherry picked Portugal from the EU countries as it makes a nice example. It is however not the European country with the highest level of normal and broad unemployment – not by a long shot. More about these other countries in the course of this week.

 

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