***OT*** Go to Google, type in "European unemployment" and you'll have fun reading. Here are some excepts from one which summarize conventional wisdom about causes:
findarticles.com
" According to official figures, around 12 percent of the working population of the
European Union (EU) is unemployed. Eighteen million European citizens, 5 million
of them under the age of twenty-five, are officially looking for work.
(snip)
However, the majority of the authors in the relevant literature, instead of blaming
economic policies implemented since 1992, attribute the European disease of
unemployment - and lost production as a consequense - on factors such as
technology, globalization, labor market rigidities, and the so-called generous
European welfare states. More specifically, an influential section of academic and
political opinion places the blame on three factors:
* The nature of the new technologies and more generally the new type of
development described as "jobless growth." Some economists view the
unemployment problem as a result of skill-biased technological change in
particular (Lawrence 1994, Krugman 1995, Baldwin and Cain 1997). It is argued
that there is a shift in the demand for skilled workers within industries, which can
be explained by skill-biased technological change. As a result, there is a decline
in the relative wages of the least-educated workers, along with increased
unemployment of these workers and of the low-skilled in particular.
* The inflexibility of the European labor market, the high living standard of
European working people, welfare programs and firing costs (Bean 1994), and,
above all, high wages, both direct and indirect (in the form of social expenditure).
Many of these inflexibilities have to do with institutional regulations (Wyplosz
1997) and are understood as the outcome of political influence by incumbent
employees ("insiders"). According to this view, labor market rigidities allow
"insiders" to achieve monopoly power in wage setting indirectly. Thus
unemployment levels are considered a direct result of the powerful political
influence exerted by people who already have jobs (Saint-Paul 1996,1997).
Conventional wisdom also mentions employment protection legislation and
generous welfare benefits in Europe, which preserve rigidities, slow response of
wages and prices to demand disturbances, and thereby increase unemployment.
* The increase of international trade and intensification of international competition,
in other words, the effects of the so-called globalization. It is claimed that the
importing of products from developing countries with low labor costs undermines
the international competitiveness of European products (Wood 1995). As a result,
industries close down and unemployment rises, especially that of the
least-educated workers (Baldwin and Cain 1997)."
It would indeed be "nice" if we lived in a utopian world where we could set high wages for all independent of employee productivity, mandate zero inflation, etc, etc. Unfortunately the real world just doesn't work that way. |
