by Andrés Rodríguez-Pose London School of Economics Oxford University Press ISBN X THE EUROPEAN UNION: ECONOMY, SOCIETY, AND POLITY

Part II SOCIETY

Chapter 5 Unemployment and social polarization

Introduction The post-war economic boom brought about nearly full employment across most of Western Europe However the oil crisis, socio-economic restructuring, and globalization have provoked a radical change in the panorama –Greater participation of women in the labour market... –But a significant rise in the levels of structural unemployment In the 1990s measures have been adopted to flexibilize labour markets: –Unemployment has decreased... –But social polarization has increased

The process of socio- economic restructuring Collapse of the (Fordist) system of mass production –Demise of the three pillars of the post-war consensus: full employment, prosperity, and social citizenship Rise in unemployment levels –From unemployment rates below 5% (bar Ireland and Italy), before 1975 –To 23% in Spain, 20% in Finland, and Ireland –By the mid-1990s the main economies in the EU (bar the UK) had unemployment rates in excess of 10% Unemployment rates as a European phenomenon: –Much lower unemployment rates in the US and Japan

Unemployment

Unemployment (II) Regional unemployment differences are even greater: –Unemployment in excess of 20% in Southern Italy, Southern and Western Spain, and the former East Germany –High rates in many old industrial regions of Northern France, Belgium, and West Germany –Low unemployment in the peripheries of large urban regions... –And in many intermediate regions

The problems of structural unemployment Having a large percentage of the population willing to work idle represents a waste for any economy –Especially since often the unemployed tend to be younger and better prepared than those employed Social exclusion –Large sections of the population are excluded from the labour force –Increase in long-term unemployment rates Serious financial problems for the state –Expansion of unemployment benefits –Unemployment benefits disguised as other benefits in certain countries (Italy and the Netherlands)

Long-term unemployment Long-term unemployment is positively linked to total unemployment –Highest long-term unemployment in the poorest regions of Spain, Greece, and the South of Italy... –But also in West Germany and Belgium –Lowest long-term unemployment in the UK and Scandinavia And negatively linked to total employment levels

Unemployment in social expenditure

The roots of persistently high unemployment The regulation of European labour markets Taxation: –Overall marginal tax rate higher than 60 percent in most European countries –In contrast, 40% in the USA and 23% in Japan –It could thus be argued that the higher the level of taxation the higher the level of unemployment –However the relationship is far from perfect: Relatively low taxation in Spain  high unemployment High taxation in Scandinavia  Lower unemployment than in other parts of Europe

The roots of persistently high unemployment (II) The power of European trade unions –Higher union membership than in the USA or Japan –Different evolution of trade union membership across the EU Decline in France (more than 50%), the UK, and Spain Moderate increases in Belgium or Scandinavia –Power of trade unions increased by having their participation in centralized collective bargaining by law –Trade unions thus represent a much larger share of the workforce than their membership may suggest –Trade unions are much less powerful in the US or Japan

The roots of persistently high unemployment (III) The existence of a minimum wage –It has been argued that the existence of minimum wages puts low skilled workers out of the market This, however, does not always seem to be the case (i.e.: introduction of the minimum wage in Britain in 1998) –More important is the level of the minimum wage –Minimum wages in Europe tend to be much higher than in the US –Countries with the highest minimum wages have endured high unemployment –The relationships is again far from perfect

The roots of persistently high unemployment (IV) High social benefits: –High social benefits have been accused of entrapping people in welfare assistance and, thus in unemployment (the ‘poverty trap’) Workers rights –Workers rights still reflect the situation of the post-war social compromise Mismatch between educational supply and labour demand

Measures to combat high unemployment Main aim: to make European labour markets more flexible Meaning of flexibility: making employees more disposable: –Easier and cheaper to dismiss –Less covered by constraining agreements and regulations over conditions –Less health, safety, and security offered to workers Two interpretations of flexibility: –Outright labour market deregulation: In the UK –The reform of labour market laws and of the welfare state: Netherlands, followed by Continental Europe Combination of restrictive measures with greater worker training

The impact of labour market reform Reduction of unemployment –Britain and the Netherlands (the early adopters) have enjoyed lower unemployment rates –Spectacular effect in Spain. Between the introduction of labour market flexibility in 1996/97 and 2000, Spain has created half of all the new jobs in the EU. Unemployment came down from 22 to 14% –Reduction of unemployment in Germany and France –Reduction even in the countries more reluctant to introduce flexibility measures: Belgium and Italy But the timing of the reforms has coincided with a period of economic expansion –And in the past economic growth has been associated with job creation

The impact of labour market reform (II) The jobs created as a result of flexibilization are not the same as the previously existing employment Emergence of atypical employment everywhere in Europe –Part time work: Mainly women: the number of women in part-time jobs triples that of men Very high in the Netherlands, low in Scandinavia –Temporary or limited contract work: Mainly the young and women Prevalent in new jobs being created in Spain and France

The impact of labour market reform (III) Other forms of atypical employment: –Self-employment: Basically male, and fundamentally a middle age phenomenon. Also among immigrant groups and minorities No sign of the emergence of a new entrepreneurial class Concentrated in low productive and marginal sectors (agriculture) High in Greece, Spain, Portugal, and Ireland –Informal employment: Family work The informal or underground economy: –Difficult to calculate, but growing across Europe –Most important in Southern Europe and Scandinavia

The informal economy Source: Schneider (2001)

The impact of labour market reform (IV) The concentration of atypical employment forms among women, the young, the elderly, ethnic minorities, and immigrants and the less skilled is contributing to the segmentation of society: –The ‘A-team’: Highly qualified stable wage-earners –The ‘B-team’: An underclass of unstable and precarious workers (MacJobs) According to some (Harvey, 2000) this represents a return to the period prior to the mid-century compromise –‘Proletarianization’ of the labour force –Employer having increasing control to the detriment of workers rights and stability

Conclusion Europe seems to be stuck between a rock (unemployment) and a hard place (atypical work) Unemployment has decreased as a result of the flexibilization of labour markets... But, inequalities have increased –Managerial and executive wages have been rising at a greater rate than those of stable employees –And the gap between stable employees and those in precarious employment has also been widening