Question

Topic: Why is unemployment so high in Europe? Briefly discuss.

Optional reading: You can use any Web browser to search for the words “European unemployment.” Just by scanning the headlines, see how many possible explanations you can list. Why Is Unemployment So High in Europe? Between World War II and the mid-1970s, unemployment in Western Europe was low. From 1960 to 1974, for example, the unemployment rate in France never got as high as 4 percent. The worldwide recession of the mid-1970s, however, jacked up unemployment rates. But unemployment continued to climb in Continental Europe long after the recession ended, topping 10 percent during the 1990s, and was still 8 percent to 9 percent in 2007. Some observers claim that the natural rate of unemployment has increased in these countries. Economists have borrowed a term from physics, hysteresis (pronounced his-ter-eé-sis), to argue that the natural rate of unemployment depends in part on the recent history of unemployment. The longer the actual unemployment rate remains above what had been the natural rate, the more the natural rate itself increases. For example, those unemployed can lose valuable job skills, such as the computer programmer who loses touch with the latest developments. As weeks of unemployment stretch into months and years, the shock and stigma may diminish, so the work ethic weakens. What’s more, some European countries offer generous unemployment benefits indefinitely, reducing the hardship of unemployment. Some Europeans have collected unemployment benefits for more than a decade. No consensus exists regarding the validity of hysteresis. The theory seems to be less relevant in the United States and Great Britain, where unemployment fell from 10 percent in 1982 to 4.5 and 5.5, respectively, in 2007. An alternative explanation for high unemployment in Continental Europe is that legislation introduced there in the 1970s made it more difficult to lay off workers. In most European countries, job dismissals must be approved by worker councils, which consider such factors as the worker’s health, marital status, and number of dependents. Severance pay has also become mandatory and can amount to a year’s pay or more. With layoffs difficult and costly, hiring became almost an irreversible decision for the employer, so firms have become reluctant to add workers, particularly untested workers with little experience. Also, high minimum wages throughout Europe, high payroll taxes, and an expanded list of worker rights have increased labor costs. For example, in Sweden, women are guaranteed a year’s paid leave on having a child and the right to work no more than six hours a day until the child reaches grade school. Swedish workers are also guaranteed at least five weeks of vacation a year; French workers get at least six weeks (Americans have no minimum vacation guarantees). Regardless of the explanation, the result is high unemployment in Continental Europe, particularly among young workers. As noted in an earlier chapter, 60 percent of those unemployed in Germany in 2006 had been out of work more than a year, versus less than 10 percent of those unemployed in the United States. Few private sector jobs have been created there since 1980. If Continental Europe had the same unemployment rate and the same labor participation rate as the United States, about 30 million more people there would be working there.. pls write me a 150 words assingment

Answer 1

There is a need for Europe over the last 30 years to confront some major facts inorder to answer the raging question of high unemployment.

Firstly,unemployment was clearly not an European characteristic.there was a very low percentile of unmeployment prevalent in the country by the end of 1960s.but by the end of 70s,there was a decling trend in the employment patterns. even now the rates are too hight around 8%.much of the initial researches focused on the effective role of shocks.the material prices rose up sharply during 1970s with a decine in post-war high growth rate.obviously, the people couldnt cope up with this shock initially, which resulted in high labour costs and high unemployment rate.by the 1980s things further worsened as there was a high interest rates with prolonged tight money and further resulted in a high capital cost with low land accumulation and thus leading to high unemployment rates.

by the mid 1980s, researchers started to focus on labour market institutions as a mainn reason for high unmemployment. europe is a nation which guve prime importance to social securities.unemployemnet geneours is actually very high. difference between tax wedge and home pay is very high.

one main reason is a cyclical unemployment which resuted from sharp rise in unemloyment trends.As a single currency EU have find it difficult to devalue their currency which furtrer led to lowered export demands.a rapid changes in skill patterns occurred after globalisation and high specialisations, which resulted in no employment for unskilled peoples.hysteresis is an important concept, long term unmeployment can discourage people and labours tend to give up their employment..