Europe's Unemployment Rate

[Lancer]

"Sure, only 0.24% or 60000 persons of the active population is incarcerated in France (instead of 2% or 2.500.000 in the US), therefore the unemployment rate would decrease by 1.74%.
Unfortunately, this would require 440000 more criminals, a quantity that cannot be presently produced nor delivered by the criminal industry."

You've obviously never had your pocket picked in France.

Niether have I, true...but if we couldn't espouse upon things of which we knew nothing what would be the point of the Poly OT? No, I support the OT and therefore Poly by talking out my ass.

[kronic]

Originally posted by Kidicious
Europe doesn't use as much monetary stimulus, because it doesn't work as well there. They have much more trouble with inflation.

Much trouble? Last time I checked, Germany had the lowest average inflation in the OECD (1965-2000: 3,24 %; US: 4,91 %). The performance of European countries in terms of inflation is very different though. The UK had very high rates (7,28 %). However, all countries that now have the € probably won't face high rates since the ECB practically imitates the structure and the policies of the German central bank (Bundesbank). For the Bundesbank and now the ECB low inflation is always more important than low unemployment. Therefore the monetary policy is very tight, yes.

The German unemployment rate is now at >12 %. I'd say, at least 8 % is structural. West Germany had <1 % until 1973. Since then unemployment has constantly grown.

[Kidlicious]

Originally posted by kronic

Much trouble? Last time I checked, Germany had the lowest average inflation in the OECD (1965-2000: 3,24 %; US: 4,91 %). The performance of European countries in terms of inflation is very different though. The UK had very high rates (7,28 %). However, all countries that now have the € probably won't face high rates since the ECB practically imitates the structure and the policies of the German central bank (Bundesbank). For the Bundesbank and now the ECB low inflation is always more important than low unemployment. Therefore the monetary policy is very tight, yes.

The German unemployment rate is now at >12 %. I'd say, at least 8 % is structural. West Germany had <1 % until 1973. Since then unemployment has constantly grown.

I agree that monetary policy is too tight, especially in Germany. You don't think that loose monetary policy in Europe could work like it works in the US though do you?

[Dracon II]

The German unemployment rate is now at >12 %

Yikes! I don't even think Australia reached that during the "recession we had to have".

[el freako]

I would say a large chunk of unemployment in certain large european countries is structural.

However the reason I think that is also a good reason to think that it doesn't matter as much as some people think it does.

Unemployment is, remember, the difference between two much larger numbers (those in work and the total workforce) and as such is affected not only by the change in the number of jobs but also the change in the number of people in the workforce.

That is why I am more confident about Europe's job markets than the unemployment figures would make you think.

Over the last 10 years unemployment has fallen from 5.6% to 5.3% in the US, in the EU15 there has been a larger fall - from 10.1% to 8.0% but the level is still much higher than in the US.

However the US figure has been slightly flattered by sluggish workforce growth whereas workforce growth has been significantly affected by rapid workforce growth.

In 1995 the US employed 71% of it's working-age population (those aged between 15 and 65) whereas the EU15 managed to employ only 60%, since then the US level has moved in a narrow range of 70% to 72% - it is currently back at 71%. The EU15's employment rate, however, has seen a sharp rise to 65% - still below the US but the gap has halved in ten years.

Why has this not led to a dramatic fall in the EU's unemployment?
Well that's because of what is happening on the other side of the equation - workforce growth.
Up until 1990 the rate of workforce participation (which is the workforce as a % of working age population) in the US rose steadily from 62% in 1960 to 75% by 1990, however since then it has been static (75% is a high rate but Japan has nearly 80% and Canada and Australia which followed the US in this have not seen their rates stop rising and have recently passed the US itself).
Europe's workforce participation rate stayed in a very narrow range of 66% to 68% between 1960 and 1995, however since then there has been a sharp rise and the level is currently 71% (again halving the gap between the US and EU over the last decade).

The upshot of all this is that the change in the unemployment rate over the last 10 years can be broken down into the effect from changes in employment (relative to the working-age population) and changes in the workforce.

US change in unemployment rate -0.4% (from 5.6% to 5.2%), sluggish (i.e. below the level of growth in the working-age population) employment growth would have caused a 0.2% rise in unemployment but this was more than matched the effect of sluggish workforce growth which lopped 0.6% off the rate.

The EU15's unemployment rate fell by 2.1% (from 10.1% to 8.0%), rapid employment growth would have lopped 7.4% off the rate if it was not countered by equally rapid workforce growth which added 5.3% to it.


In conclusion, whilst the US still has a better overall employment situation (higher workforce participation and employment, together with lower unemployment) the gap has narrowed significantly over the last decade.
What appears to have happened is that the US and EU have switched places compared to what was happening in the 1970s and 1980s - with the US experiencing sluggish employment and workforce growth whilst the EU is seeing a boom (and it's not being countered by falling hours either - between 1960 and 1995 the EU consistantly saw it's total hours worked grow by 2% a year less than the US, since 1995 that gap has all but disappeared)

[:) Smiley]

How do countries manage to have aging populations and high employment at the same time?

[el freako]

Originally posted by Dracon II

The German unemployment rate is now at >12 %

Yikes! I don't even think Australia reached that during the "recession we had to have".

That 12% german rate is not comparable with Australia's - using the OECD's standardized rates Germany's unemployment is currently 9.7% which is below the 10.6% Australia reached in 1993.

Originally posted by Smiley
How do countries manage to have aging populations and high employment at the same time?

Because:
1) Europe's population is not aging as fast as first thought, mainly due to much higher immigration.
2) There was significant under-utilization of the working-age population before, enabling a certain amount of 'catch-up'

[kronic]

Originally posted by Kidicious
I agree that monetary policy is too tight, especially in Germany. You don't think that loose monetary policy in Europe could work like it works in the US though do you?

I do think, it can, but I don't think, it will change. As I already said, the ECB only cares for low inflation. It is very unlikely that these guys will ever change their course. It is nearly impossible for EU politicians or national parliaments to influence ECB policies since the ECB is totally independent (like the Bundesbank was). There's also rarely a good coordination between fiscal and monetary policies. The ECB normally just ignores what the governments want.

[chequita guevara]

Originally posted by DanS
The Euros need to figure out the joys of mass incarceration.

And militarization.

[el freako]

BTW I have a spreadsheet with graphs showing the change in employment as a percentage of working-age population for all 30 OECD member for the period 1960-2005.

If it interests you have a look

[chequita guevara]

Also, I'm sure Europe doesn't have as many starvation wage jobs, whih force workers to live on friends' couches or in their cars while working at Wal-Mart or other such places. Europe's unemployment insurance is also far superior to America's, so unemployed workers can hold out longer looking for a job in their field, rather than being forced to take any work available.

[Lawrence of Arabia]

Unemployment benefits in France extend for 2 years. Dont you think thats kinda excessive?

[DanS]

And militarization.

I would guess that Europe has a similar %-age of population under arms versus the US.

[Japher]

prob is socialist economies discourage private buisnesses... 5% of all Americans are in between buisness ventures, IMO... That could make up the diff.

[DanS]

The US isn't a socialist economy?