Unemployment in Europe by Henri Wilno THE EUROPEAN UNION IS A HIGH-UNemployment region. Government policies that are undermining hard-won social programmes and cutting back growth rates offer no hope of a way out.
According to official statistics based on International Labour Organisation (ILO) methods,! the EU's average unemployment rate is approaching 11 percent. This figure gives a very restrictive picture of the real proportion of jobless. Realism would require adding in first of all the "discouraged workers", i.e. those who think they have practically no chance of finding a job and therefore in normal times make no concrete efforts to look for one (though they may return to the labour market when the economic situation improves). These people live off welfare payments and petty, short-term, under-the-table jobs. Other people should also be counted as unemployed: e.g. those whose countries' laws do not allow them to look for work (older unemployed people in France for example and people taking part Table 1
Unemployment in the EU
1993 *94 95 1/96
Germany 7.9 8.4 8.3 8.7
Italy 10.4 11.5 11.9 12.4
France 11.7 12.3 11.5 11.6 Belgium 8.9 10.0 10.1 10.1 Holland 6.7 7.4 6.9 7.2
Britain 10.3 9.5 8.7 8.6
Spain 22.9 24.1 22.8 22.6
EU (15 states) 10.8 11.2 10.8 10.9
USA 6.8 6.1 5.6 5.7 Source: Eurostat, OECD. in various employment programmes: training schemes and part-time, low-pay jobs in the non-market sector (administration, social services, etc.). Finally, in addition to all these hidden jobless, there are growing numbers of part-time workers who would like to work more: 40 percent of part-time workers in France, amounting to 16 percent of all wage mers. The American Model
High levels of unemployment in Europe
: contrasted with the situation in the US able 1). This gap would be smaller if couraged workers (a greater proportion in (tie: US) were counted, but it would still be significant. Besides, growth seems to create fewer jobs in Europe than in the US: from 1983 to 1991, one percent growth meant 0.7 percent more jobs in the US, but less than 0.4 percent more jobs in Europe (table 2).
To explain this situation, neo-liberal economists and international economic institutions like the OECD blame "Eurosclerosis": all the mechanisms that regulate layoffs, minimum wages and social insurance programmes. These provisions are supposedly preventing Europe from experiencing the same job growth (particularly in services) as in the US. In order to create jobs, they say, Europe should dismantle the welfare state and accept greater inequality, which goes together with greater economic dynamism.
Margaret Thatcher's and John Major's Britain put these precepts into practice. The results were devastating on the social level. Despite self-satisfied pronouncements by Britain's rulers, the results in reducing unemployment are not so clear. Although unemployment is lower in Britain than the rest of the EU, it is still high. In any event, there is no way to distinguish the aspects of Britain's performance that are due to attacking social programmes from those that result from devaluation of the pound. US economist Richard Freeman (of Harvard and the London School of Economics) maintains that the case of the UK proves in fact that labour-market "flexibility" does not solve unemployment.2 Despite the inconclusive outcome of the British experiment, the same kind of reasoning still inspires, in different degrees and dressed up in different plumage, the policies advocated by the European Commission in Brussels and the various EU governments.
The neo-liberal arguments basically boil down to the idea that the US works well and Europe works badly. But as another well-known US economist, Paul Krugman, asks, "If the welfare state is so terrible for employment, why were European countries able to keep unemployment so low before 1970?3 In Krugman's eyes, the economies are dysfunctional on both sides of the Atlantic: on one side the dysfunctionality shows up as unemployment, on the other side as low wages. The US minimum wage lost a third of its buying power between 1968 and 1989, was not raised at all between 1980 and 1989, and since 1991 has been stuck at $4.25 an hour (about £2.80). The "working poor" , who work in particular without health insurance, make up an increasing proportion of the US labour force. According to Krugman, the same cause that led to the crisis of the European model accounts for the sad results in the US as well: the cause is the new market logic that reduces demand for unskilled and semi-skilled labour. Even if one considers this last point debatable, this does not invalidate Krugman's conclusion: that the American system is not a positive alternative that can solve Europe's problems.
Another high-level US economist, Table 2 Productivity and employment: the relationship Germany France Britain USA * Elasticity of 0.4 suggests that a 1% growth in production will cause a 0,4% increase in jobs. Source: Average yearly stats. (1983-91) by Eurostat working along the same lines, stresses two points: • Even if unemployment in the US is low, there is a high number of discouraged workers and people employed in illegal trade (particularly the drug trade). • Unskilled US workers have experienced
International Viewpoint 27
* Europe: supranational state?
declining wages and a simultaneous rise in unemployment: unemployment among unskilled workers has risen from five percent in the early 1970s to 12 percent today.4
Overall, the US and Britain are examples of societies that are more and more broken up and characterized by deep inequality, without any real ensuing economic benefit. We have already mentioned that part of the job creation in the UK can be attricated to devaluation of the pound. For its part, the US used its budget deficits and the weapon of high interest rates, particularly against Japan: this made possible more sustained growth than in Europe since the early 1990s and presumably has something to do with the monetary union today. This explains the two country's announcement in early May of budget cutbacks (and cuts in social benefits in Germany). Having inflicted major defeats on British and Italian workers, capital is aiming today at sweeping changes in the social ground rules in France and Germany in order to unleash free-market forces completely. workers' movement to impose a shorter work-week and a policy of economic growth based on satisfying social needs. * notes 1. The ILO defines an unemployed person as someone without a job who has not worked one hour during the week when the survey was made, is available for work, and is actively seeking work. 2. Richard B. Freeman, "La flexibilite ne mene pas loin", Alternatives Economiques no. 135, March 1996. 3. Paul Krugman, "Europe jobless, America penniless?", Foreign Policy (Washington), summer 1994. 4. Le Monde, March 12, 1996. 5. Interest rates have fallen recently in Europe, but they are still pushing up budget deficits: debt service constitutes a growing share of government spending and produces no economic growth.
employment situation. Maastricht versus Jobs