Why Such Disparity Between Unemployment Rates In Europe?

Denis MacShane

Eurostat has just published its latest unemployment figures. For the EU and Eurozone. Overall, they show continuing progress though youth unemployment remains seriously high.

But the statistics do not explain why some countries have much higher rates of joblessness than others with Greece posting nearly ten times the rate of unemployment as the Czech Republic and Spain, the same size as Poland, having nearly five times as many out of work as the EU’s most easterly member state.

One of the most curious aspects is how well the former communist countries have done in getting unemployment down to very low levels. The transition to a market economy has been rough but with Czechia, Hungary and Poland all posting unemployment rates below that of Britain, where commentators boast endlessly of the UK’s high levels of job creation, it would seem that former communist economies have adapted well.

Romania, Bulgaria and Estonia have lower unemployment than the EU’s three Nordic member states – Denmark, Sweden and Finland – that are often held up by progressives as labour market models to follow and emulate.

Ten years ago, as the financial crisis broke, everyone wrote of the PIGS – Portugal, Ireland, Greece and Spain – as the bankrupt nations that would probably have to exit the Euro to survive and perhaps even suspend EU membership.

Yet, today Irish unemployment stands at 5.3%, a shade above the UK level, and Portugal’s at 7.3% with Lisbon appealing to nurses and other Portuguese workers in Brexit Britain to return home as labour shortages are appearing.

Jobs puzzle

So why have Italy and Greece been unable to cut their unemployment rates as Portugal and Ireland have done?

It is fashionable for left-wing UK commentators like Owen Jones and Paul Mason and their equivalents in European capitals to blame Brussels, austerity or, in the case of Greece, Berlin with Greek supporters of Syriza in 2015 painting Hitler moustaches onto Angela Merkel’s lips on protest posters.

But the same EU and Eurozone policies have been applied elsewhere and produced big drops in unemployment.

There seems no correlation either with the colour of the government. Spain was ruled by socialists until 2012 and has just booted out the centre-right PP government but unemployent remains stubbornly high. Greece switched from a conservative New Democracy team in 2015 to Europe’s most left government – at least in terms of the rhetoric of Yanis Varoufakis – but has been unable to tackle unemployment seriously (It was 22.1 per cent a year ago).

Political puzzle

A common explanation of the rise of right-wing populist, xenophobic and nationalist governments (or the Brexit result) is that those without jobs, or income or who feel the losers and left-behinds of Europe’s version of globalisation take their revenge by voting in right-wing anti-immigrant governments.

Yet again, it is the EU member states with the highest job-creation records – Hungary, Poland, Austria, Slovakia or Czechia which have voted into power illiberal, and Muslim-baiting political parties hostile to media freedom or European integration values.

Nor is it possible to read across trade union density with unemployment. France has the lowest number of workers paying membership dues to trade unions – eight per cent of the workforce – but twice the level of unemployment as Hungary and Poland where unions organise 12 per cent of the workforce according to European Trade Union Institute figures.

Those who claim that the creation of the Euro is an unqualified success have to explain why in May 2018 of the 3.377 billion young persons who were unemployed in the EU28 two-thirds – 2.390bn – were in the euro area.

The figures show an improvement as the overall pick-up in the total EU economy (minus Brexit Britain) continues. Compared with May 2017, youth unemployment decreased by 519,000 in the EU28 and by 353,000 in the euro area. In May 2018, the youth unemployment rate was 15.1per cent in the EU28 and 16.8 per cent in the euro area, compared with 17.2 per cent and 19.3 per cent respectively a year earlier. Nevertheless, the highest levels of youth unemployment were all in Euro member states – Greece (43.2 per cent in March 2018), Spain (33.8 per cent) and Italy (31.9 per cent). Why?

The latest EU statistics show fascinating variations which surely deserve some closer analysis. If Europe is to hold together it must understand the modern world of employment and why some nations are better at creating jobs than others.

Ed: Some have tried to answer the author’s question. See here and here and here or here