Europe is struggling. Since 2008 the European Union and its twenty-seven Member State governments have been under ever-increasing pressure to pull the continent out of its economic slump. Alongside this there have been endless remedies for how exactly this can be done. However, with continued threats of a renewed credit crunch, ever increasing calls from some Member States for financial bailouts, and worryingly high unemployment rates, it is clear that there is no one-size-fits-all solution.
Unemployment in the EU, for example, has risen from 7.1 per cent in 2008 to 9.6 per cent in 2011 while youth unemployment (those aged up to twenty-five) has increased by 5.7 per cent since 2007 to a high of 21.4 per cent in 2011 and there remains no clear answer as to how to reverse this trend. It was this rise in unemployment which brought together speakers and guests from all over Europe for a Citizen’s Controversy debate: How to Switch from Jobless Growth to Growthless Jobs? The debate was moderated by Pierre Defraigne, the Executive Director of the Madariaga College of Europe Foundation where the debate was held, and the two speakers were Joep Konings, Professor of Economics at the University of Leuven, and Stefano Scarpetta, Head of Employment and Policy Division at the Organisation for Economic Cooperation and Development (OECD).
The Unemployment Problem
Many interesting and contrasting views were expressed during the debate which will be published in a report by Madariaga. In this blog I will outline a few of the issues which arose. Firstly, it was stressed that the problem is not simply that more people, especially young people, are unemployed. The percentage of those people without a job who are long-term unemployed – that is for twelve months or longer – is increasing rapidly. This creates further problems as the labour market continues to adapt and move forward and the long-term unemployed require ever-increasing levels of training to re-enter the job market. It is not simply about creating new jobs but also ensuring that those in need of work have the right skills.
Secondly, as many Member States artificially solve the crisis by offering incentives to businesses to increase their workforce, other problems arise. Underemployment, those who are employed but do not earn enough to cover their living expenses; skills mismatch, where people are overqualified for their job; and lack of training, where the jobs created do not match the skills set of those seeking employment, are all at risk of increasing in this situation. Encouraging businesses to spur employment is a useful short-term solution but must be combined with other policies in order to make real improvements.
A third key point was made that the relationship between economic growth and employment is not as clear-cut as many assume. While the European economies are gradually recovering, unemployment rates are not following suit. For example, OECD statistics show that employment levels in Germany remained level in 2009 although the Gross Domestic Product (GDP) fell by 4.7 per cent, while in 2010 the Netherlands experienced a 1.8 per cent growth in GDP and a 0.5 per cent drop in employment. There is a correlation between GDP and employment figures, but, as was stressed at the debate, economic growth is not enough to create employment growth.
Finally, the subject of inequality was raised. There was certainly not enough time in a ninety minute debate to fully examine the effect that increased unemployment has on income inequality across Europe, nevertheless some important issues arose. An OECD report produced in 2011 shows that income inequality is increasing in the majority of countries; within the EU the Nordic countries showed the greatest increase in income inequality. Unemployment, and many of the measures used to tackle it, often increases this income gap, especially as welfare and education spending is cut.
With such multifaceted, interconnecting issues, what can be done? The challenge is to combine a number of policies which together can spur and stabilise economic and employment growth. The first step is to protect those who are unemployed from falling into poverty by providing adequate social services and benefits coupled with supporting job seekers through training tailored to the job market. Alongside this there is a need to provide and encourage life-long learning. Education and on-the-job training need to be widely available and must adapt to market needs so as to encourage businesses to grow and reduce the risk of long-term unemployment in the future.
At a wider level what is needed is growth which focuses on quality rather than quantity and tax systems which complement this. What this means is that governments cannot blindly strive for continued economic growth if this is not secured by growth in other areas like education and healthcare. Tax systems then need to reflect this. This requires new forms of taxation which offer companies incentives to look to long-term, stable expansion as well as increasing their workforce and which encourages the redistribution of wealth throughout society.
There is no single solution to the unemployment problem in Europe. No magic wand governments can wave to get people back into jobs. The problem is not just a lack of jobs, and therefore cannot be solved by focusing on economic growth alone. The Citizen’s Controversy debate has not provided all the answers; that was not its intention. What it has done is open up the issue to a wider audience and provoked an important discussion which we hope will encourage the EU and its Member States to consider new ways of producing growthless jobs.
To be continued…
While the debate certainly brought some important new insights to light, it is important also to mention some key issues which were not addressed. Firstly, the discussions on growth and why we need to move away from purely economic growth included no reference to the environment. Certainly we cannot continue to push for economic growth at the expense of wider social issues, but we must also consider how this growth affects our environment. As Member States attempt to reform their economic policies to ensure a more stable future and prevent future recession, now is the time to include resource efficiency, climate change, and environmental sustainability in these reforms. By moving the focus away from short-term economic goals towards long-term sustainable growth, Member States could make real, positive steps towards achieving the 20-20-20 goals of reduced energy consumption, greater use of renewable energy, and reduced greenhouse gas emissions.
As has been mentioned, high unemployment is not simply the result of a lack of jobs, and several explanations for this were put forward. What was missed, however, was the problem of job distribution. Alongside increasing unemployment there are many people who are either working very long hours or are expected to do far more work than they are capable of. A better redistribution of this work would help those who are unemployed as well as those who are overworked.
Finally, any discussion of employment should include mention of exploitation. As people become increasingly desperate for work, some employers use this desperation to offer internships and work experience – especially to young people who are both less experienced and more likely to be unemployed – without paying them for their work. While many employees gain valuable experience from this type of work, others are simply used as a money saving tool by employers.
The inclusion of income inequality in this debate was welcomed; indeed the point was made that, considering what a huge issue inequality is, it is so often disregarded by governments in the EU. The reason for this is that there is simply not enough awareness of the enormous negative impact that an increasing income gap has on all areas of society. In their book The Spirit Level, Richard Wilkinson and Kate Pickett offer some hugely compelling arguments, backed up by extensive research, which show exactly how far-reaching the effects are.
What is not widely understood is that quality of life is not simply about how much money you and your loved ones may have. In a society with high levels of income inequality it is not simply those who are poorer who suffer; the quality of life for the whole society is reduced. The book, and the website which accompanies it, provides data showing the detrimental effects inequality has on mental and physical health, social relations, crime rates, violence, criminal justice, education, drug use and many other areas of society. Clearly all of these factors put a huge burden on public finances which Member States are urgently trying to keep under control. Allowing economies to grow without attempting to reduce income inequality will result in further social problems across all levels of society. By addressing the issue now, however, governments can reduce this burden on public finances and, more importantly, improve the lives of those on every rung of the social ladder.