Chronic high unemployment in the U.S. and Europe

Stephen Beard Aug 16, 2011

Chronic high unemployment in the U.S. and Europe

Stephen Beard Aug 16, 2011

KAI RYSSDAL: We started today with Europe and its debt problem. We’ll get the second half of the broadcast rolling with Europe and its jobs problem.

Bad as it’s been here, long-term unemployment’s been a much bigger issue in Europe — more people out of work for more time, depending on where you live. From the European Desk, Marketplace’s Stephen Beard reports.

STEPHEN BEARD: No one visiting Retiro Park in Central Madrid, Spain would think the Europeans could teach the U.S. anything about curbing unemployment. The park is full of young, jobless men. In this country 43 percent of the under 30s are unemployed, and after two or three years out of work some, like Diego Hernandez and Omid Mohsani, are losing hope.

DIEGO HERNANDEZ: We can’t dream about house, about many things, not about buy a car or something like that.

OMID MOHSANI: Right now it’s really, really, really difficult to find a job here. And I go every day, every day I go out from my house I go to many, many, many place to ask about a job but no, nothing.

But Spain is Europe’s worst employment black spot. Germany, Britain, all of Scandinavia, and the Netherlands are doing somewhat better than the U.S. The reason, says David Grubb of the Organisation for Economic Co-operation and Development, comes down to unemployment pay. He says America’s decision to extend the benefit period from 26 to 99 weeks helps to account for the U.S.’s stubbornly high unemployment rate.

DAVID GRUBB: Many European countries have experienced this that when benefit systems are increased, benefits are made more generous, in various different ways, unemployment goes up.

It goes up, he says, because the unemployed have less incentive to get back to work as soon as possible.

John Philpott is with the Chartered Institute of Personnel and Development in London.

JOHN PHILPOTT: I think there are lessons for the U.S. to learn in terms of benefits and labor market program policies.

Philpott says what matters are the conditions attached to the benefits. Some European countries — Germany, the Netherlands and others — offer much more generous unemployment pay than the U.S. and for longer, but they have a lower unemployment rate because they constantly pester and cajole and, if necessary, retrain the unemployed back into jobs.

PHILPOTT: The Danes also invest a lot in jobs programs in order to make sure that people are helped back into work. In European jargon it’s called “Flexecurity.”

There is an irony here: throughout the last decade the U.S. lectured Europe on the merits of deregulation and labor market flexibility. The motto was: if it is easier to fire, it will be easier to hire. But that’s now backfired on American workers, and also explains America’s high unemployment.

Ian Brinkley of the Work Foundation.

IAN BRINKLEY: American employers shed labor very rapidly and very quickly. In Germany and the U.K. they didn’t. They held on to labor much more than we would have thought they would have done given the severity of the downturn.

Of course when the U.S. economy bounces back, U.S. business will no doubt be snapping up workers again. And there will be much less need for jobs programs and other such European-style initiatives. But the bounce back doesn’t seem imminent. And the longer people are jobless, the harder it is to get them back to work, as the Europeans — and especially the Spanish — know only too well.

At the European Desk in London, I’m Stephen Beard for Marketplace.

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