The European Labour Market 2013: A Brief Appraisal

David Bell University of Stirling (cosse)

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Recent EU Labour Market Performance Weak Rapid increase in unemployment /decline in employment 2008q2 to 20010q2 Stability until 2011q1 then more deterioration in labour market, though at a slower rate Between 2008q2 and 2012q3 in EU as a whole
Increase in unemployment 9million Decrease in employment 5million Increase in economically active 4 million
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EU Labour Market Performance Weak

Increase in both male and female unemployment, but different trends underlie this
Unemployed population, Aged 1574 Employed population, Aged 15-74

Males
Active population, Aged 15-74 Females

Working age population, Aged 15-74

-6,000,000 -2,000,000 2,000,000 6,000,000 10,000,000

Almost all of the fall in employment is male Almost all of the increase in activity is female Small increase in working age population

Self-employment has not fallen .

Self-employment in the EU 2005Q1-2012Q3
Self-employment (thousands) 34,000 33,000 32,000 31,000 30,000 29,000 28,000 27,000 2005Q1 2006Q3 2007Q2 2008Q1 2008Q4 2010Q2 2011Q1 2011Q4 2012Q3

Is the relatively more robust performance of selfemployment indicative of a distressed labour market? Between 2008 and 2011, parttime employment increased as a share of EU employment from 18.2 per cent to 19.5 per cent In the UK, there has been a very substantial increase in parttime self-employment. Combined distress?

2005Q4

2009Q3

Long-term unemployment increasing ..

Share of long-term unemployed in total unemployment (LTU). European Union 2005-2012
50

Increase in LTU delayed after initial increase in unemployment Drop in LTU from 2005 to 2009. Supply-side policy interventions working?

Percent of Long-Term Unemployed

45

40

35

LTU as share of total unemployment only now returning to its 2005 level
Influence of activation policies on this share?

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25 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3

The young continue to suffer

Jobs for the young disappearing faster than those for the working age population as a whole Youth unemployment rising faster
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EU unemployment performance compares badly with USA

USA historically lower unemployment rate than EU US unemployment rate increased faster than EU in 2008-09 Since 2010, US unemployment rate has been falling rapidly, while EU continues to rise Eurozone performance slightly worse than EU as a whole

US labour market not working well long-durations, housing market but government stimulating demand
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Increased variability in EU unemployment rates began at same time as recession

Mirrors increase in variance of yield spreads but has not declined in same way since 2012 Quantities take much longer to adjust than prices

Unemployment differences across major economies

Spain
60 50 40 30 20 10 0 Q1-2003 Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 30 25 20 15 10 5 0

France

Unemployment Rate 15-24 Unemployment Rate 55-64

Unemployment Rate 15-24 Unemployment Rate 55-64

Germany
20 15 10 5 0 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 Unemployment Rate 15-24 Unemployment Rate 55-64

Growing disparity in unemployment rates. Young doing particularly badly in labour market but higher youth unemployment rates started before recession

Q1-2003 Q1-2004 Q1-2005 Q1-2006 Q1-2007 Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012

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Different trends in unemployment, employment and economic activity

Change in EU Unemployment 2008Q2-2012Q3
Spain Italy Greece United Kingdom France Poland Portugal Netherlands Ireland Czech Republic Hungary Denmark Slovak Republic Sweden Slovenia Belgium Austria Finland Estonia Luxembourg Germany
-2,000,000 2,000,000 4,000,000

Much of the increase in unemployment concentrated in Spain. Germany has made the only significant negative impact on aggregate EU unemployment

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Different trends in unemployment, employment and economic activity

Change in EU Employment 2008Q2-2012Q3
Germany Belgium Austria Sweden Hungary Luxembourg United Kingdom Estonia Finland Slovenia Slovak Republic Czech Republic France Poland Netherlands Denmark Ireland Italy Portugal Greece Spain
-4,000,000 -2,000,000 2,000,000

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Different trends in unemployment, employment and economic activity

Change in EU Economically Active 2008Q2-2012Q3
Germany United Kingdom France Italy Poland Spain Belgium Hungary Sweden Austria Netherlands Greece Czech Republic Luxembourg Slovak Republic Estonia Finland Slovenia Denmark Ireland Portugal -200,000 200,000 600,000 1,000,000

NB Much smaller numbers than the change in employment or in unemployment

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Although output shocks different in nature, the labour market response to these has varied

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Given the change in output, some countries labour markets have still performed poorly

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Hours have taken some of the strain

39.0 38.5 Weekly Hours (all workers) 38.0 37.5 37.0 36.5 36.0 35.5 35.0 34.5 34.0 Ireland Germany UK Spain

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Explanations/policies

Recession most severe if caused by financial imbalance in private and/or public sectors Financial imbalance impacts on the construction sector - disproportionately affects young males. Failures in housing market then become an obstacle to labour market recovery Part of recovery may involve policies to restore construction sector/housing market closer to longrun equilibrium
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Labour Market Policy

Labour market structure clearly affecting outcomes: For example:

Structure of contracts in Spanish labour market make it sensitive to output fluctuations Because market is highly regulated, risk averse employers will avoid entering long-term employment contracts

However, this is a long-run supply-side issue. Reform unlikely to have an immediate effect on demand for labour. Meanwhile those economies which have suffered financial crises are suffering from a chronic shortage of domestic demand.

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German aspirations?
The (German) apprenticeship system is really one gigantic microeconomic management exercise that involves all the relevant stakeholders in society. The core lesson from Germany is that this is not a topdown approach, but really a bottom up one. Every company, every school principal, every mayor, every nongovernmental organization, and every church can make a difference. It is the focus to detail and a keen interest in young peoples future path that counts the mostnot lofty white papers or grandiose policy announcements issued in the national capital. Klaus Zimmerman, Jobs and Development Blog
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Prospects negative view?

Goods market still in difficulty. Weakening demand in part resulting from fiscal austerity Labour market reform will not bear fruit for some time Limited collective will to fix imbalances In these circumstances, labour market recovery likely to be prolonged and imbalanced across Europe.
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Positive - Policy Responses?

If austerity policies weakened:
Reduced payroll taxes Infrastructure investment (aiding construction industry)

Fix financial institutions failure to liquidate zombie companies (and take debts onto balance sheets) may inhibit labour and capital reallocation Specific short-term assistance to young (e.g. job mentoring, subsidised travel) avoid scarring (Bell/Blanchflower) Put in place institutional structures that support internal migration Greater wage flexibility to restore competitiveness
UK real wages falling depreciation against euro

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Thank you!

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