ICC Visits LA & European Unemployment
A member of the ICC (International Communist Current) came to visit the Los Angeles region. He gave a talk last night in Hyland Park and tonight will be speaking at the People’s Library in south central LA. The comrade is discussing the 2006 events in France when the students and workers successfully beat back an attempt by the government to implement an at will labor contract for young employees in the first years of employment up to age 26. Up to 3 million people joined the protests and there were threatened strikes.
This is an analysis of what the French government tried to do and the reasons why it would not work to increase employment from the Center for Economic & Policy Research.
“French Labor Law Reform Not Supported By Economic Evidence
Mark Weisbrot På Svenska
Pittsburgh Tribune-Review (PA), April 8, 2006 More than a million people in France have taken to the streets against their conservative government’s attempts to change the country’s labor law. Here in the United States, these strikes and protests are generally seen as another example of France’s inability to come to grips with the reality of “the global economy.”
According to the conventional wisdom here, “Old Europe” is in need of serious economic reform. But will the reforms currently on the European political agenda actually help most Europeans?
One of the recommended reforms is more “labor market flexibility.” This is an economist’s way of saying it should be easier to fire employees and there should be less generous public pensions and unemployment compensation, and lower payroll taxes. Lower wages and benefits attached to employment, as well as a reduced influence of unions also fall into this category.
The French government has proposed to allow employers to fire employees under 26 years of age without having to show cause. To Americans this may seem strange, since employers under U.S. law are generally permitted to fire anyone without having to give a reason. But this is not the case in most other high-income countries, and even in many developing countries.
The government claims that employers will hire more people if it is easier to get rid of them, and that therefore unemployment (especially among younger workers) will be reduced. But the available economic research provides little or no evidence for this argument.*
For example, there is no relationship between the amount of employment protection in different countries and their unemployment rate. This is true generally for measures often portrayed as having a negative impact on employment: for example, unemployment compensation, national collective bargaining, or the percentage of union members. While it is true that France’s unemployment rate is relatively high (9.2 percent), there are a number of countries with high levels of labor market protections and low levels of unemployment: Austria (5.2 percent), Denmark (4.4 percent), Ireland (4.3 percent), the Netherlands (4.6 percent), and Norway (4.5 percent).
This makes sense if we think about it in economic terms. First, it is not as though employers can’t fire people in France or elsewhere in Europe – they just have to show cause. They may prefer the American system, but if there are profitable opportunities for expansion, they will hire more workers. A country’s level of employment (and unemployment) generally has much more to do with the overall demand for the goods and services that its businesses produce, rather than the rules or benefits that affect individual employers.
Why then is Europe’s unemployment currently higher (8.4 percent for the high-income countries of Europe) than that of the United States (4.8 percent)? One possibility is that the European Central Bank (ECB) has kept interest rates higher than it should have in recent years. As the U.S. economy slowed in 2001, the Federal Reserve lowered interest rates aggressively (to one percent in 2003) and kept them low for three years into our current economic expansion. The ECB was slower to cut interest rates and has been raising them this year, despite relatively sluggish growth and inflation of only 2.3 percent.
The idea that labor protections are the cause of European unemployment is part of an overall myth that Europeans would benefit from a more American-style economy. The U.S. economy is said to be more competitive, yet we are running a record trade deficit of more than 6 percent of GDP, and the European Union is running a trade surplus. The U.S. economy is supposedly more dynamic, but French productivity is actually higher than ours. Their public pensions, free tuition at universities, longer vacations (4-5 weeks as compared with 2 weeks here), state-sponsored day care, and other benefits are said to be unaffordable in a “global economy.” But since these were affordable in years past, there is no economic logic that would make them less so today, with productivity having grown – no matter what happens in India or China.
French students and workers seem to have a better understanding of these economic issues than their political leaders. Hopefully, the wisdom of the crowd will prevail.
* See “Unemployment and Labor Market Institutions” by Dean Baker, Andrew Glyn, David Howell, and John Schmitt. (2004). Center for Economic Policy Analysis.
Mark Weisbrot is Co-Director of the Center for Economic and Policy Research, in Washington, DC.”
While these unemployment figures reflect the overheated 2006 economy, the article below from Eurostat will give you more current information. It also shows that European countries can lay off worker just as they do in the USA. The difference is the safety net. In Western Europe it is much greater than in the USA.
“Unemployment statistics
From Statistics explained
This is the latest quality revision, approved on 5 July 2010. The draft has 2 changes awaiting review.
Data until May 2010.
The euro area seasonally-adjusted unemployment rate was 10.0% in May 2010, unchanged compared with April. It was 9.4% in May 2009. The EU unemployment rate was 9.6% in May 2010, unchanged compared with April. It was 8.9% in May 2009.
Among the Member States, the lowest unemployment rates were recorded in Austria (4.0%) and in the Netherlands (4.3%), and the highest rates in Latvia (20.0% in the first quarter of 2010), Spain (19.9%) and Estonia (19.0% in the first quarter of 2010).
Compared with a year ago, five Member States recorded a fall in the unemployment rate and twenty-two an increase. The largest falls were observed in Austria (4.9% to 4.0%) and Germany (7.6% to 7.0%). The highest increases were registered in Estonia (11.0% to 19.0% between the first quarters of 2009 and 2010) and Latvia (13.5% to 20.0% between the first quarters of 2009 and 2010).
Between May 2009 and May 2010, the unemployment rate for males rose from 9.2% to 9.9% in the euro area and from 8.9% to 9.7% in the EU27. The female unemployment rate increased from 9.5% to 10.2% in the euro area and from 8.8% to 9.5% in the EU.
In May 2010, the youth unemployment rate (under-25s) was 19.9% in the euro area and 20.5% in the EU. In May 2009 it was 19.4% and 19.5% respectively. The lowest rate was observed in the Netherlands (8.1%), and the highest rates in Spain (40.5%) and Estonia (39.8% in the first quarter of 2010.)
In May 2010, the unemployment rate was 9.7% in the USA and 5.2% in Japan.
Unemployment trends
In early 2000, just below 20 million persons were unemployed in the 27 countries currently forming the European Union, slightly below 9% of the labour force. This figure fell to around 19 million (8.5%) in early 2001 before rising back to around 21 million persons. It remained around this level from the middle of 2002 up to the middle of 2005, when a period of several years of steadily declining unemployment started. In the first quarter of 2008, the unemployment hit a low of 16 million persons (6.7%) before rising sharply in the wake of the economic crisis.
The unemployment rate in the euro area (EA-16) follows roughly the same trend as in the EU as a whole. However, between 2000 and the middle of 2004 the unemployment rate in the euro area was below the rate in the EU (EU-27). Since then, this is reversed because the unemployment declined more rapidly in the Member states which do not yet have the euro (mainly new Member States) between 2005 and 2008.
In 2000, the unemployment rate in the United States was around 4%, significantly lower than in Europe. It remained much lower until early 2008, when unemployment levels started to grow strongly. By mid-2009, the US rate had caught up with the EU rate.
Rates in Japan are still much lower than in Europe, as they have been throughout the last 10 years.”
This latest crisis in Capitalism has led to a return to 10% unemployment levels in Europe and a more than doubling of the levels in the USA to about the same as Europe. Japan alone of the major developed nations seems to have fairly stable levels along with certain northern European economies. This seems to reflect statistics from before the Greek Economy blow up.
This from Reporternet.com
“Greek unemployment rate to 14.3% in 2011 says OECD
In its latest Employment Outlook issued , OECD projects Greek unemployment rate to rise to 12.1% in 2010 and to 14.3% in 2011 from 9.5% in 2009. Furthermore, employment, after slipping 1.1% in 2009, is anticipated to further ease by 2.8% in 2010 and 2.5% in 2011. We remind that according to the latest Greek government projections (incl. in the MoU on specific economic policy conditionality) unemployment is seen at 11.8% in 2010 peaking to 14.8% in 2012.”
This is from Bloomberg about Spanish Unemployment rates.
“Spanish Unemployment Tops 20%, Hurting Deficit Fight (Update3)
April 30, 2010, 9:47 AM EDT
By Emma Ross-Thomas
April 30 (Bloomberg) — Spain’s unemployment rate rose above 20 percent for the first time in more than a decade, undermining Prime Minister Jose Luis Rodriguez Zapatero’s fight to cut the euro region’s third-largest budget deficit.
Spanish borrowing costs have surged in the past two weeks on concern the country will struggle to push the deficit below the EU limit of 3 percent of economic output. Standard & Poor’s cut Spain’s credit rating on April 28, saying the government was underestimating its fiscal problems and overestimating growth prospects. Adding to public spending, Zapatero has extended benefits for the long-term unemployed.
“The government’s scenario is a bit more optimistic than what we’re seeing, so the welfare costs for the unemployed are going to be higher,” said Jesus Castillo, an economist at Natixis in Paris. “If they don’t take new measures the 3 percent deficit target is not going to be met.”
Bond Yields
The extra yield investors demand to hold Spanish debt rather than German equivalents rose to 99.8 basis points today from 99.1 basis points yesterday. The premium reached the highest in more than a year this week.
Deputy Finance Minister Jose Manuel Campa said the unemployment rate would not affect Spain’s budget-deficit forecasts, and the government was sticking to a forecast for an average jobless rate of 19 percent this year. Finance Minister Elena Salgado said the rate would fall in “the coming quarters” and the number of unemployed, at 4.6 million in the first quarter, would not reach 5 million.
She made the comments today after a Cabinet meeting, where ministers approved a plan to cut the number of high-ranking civil servants by around 10 percent and reduce the number of public companies to save 16 million euros ($21 million) a year.
Budget Gap
At 11.2 percent of gross domestic product, Spain’s budget shortfall was the third-biggest in the euro area last year, trailing only Greece and Ireland. S&P said it expects the Spanish deficit to stay above 5 percent in 2013, the year the government has pledged to cut it to the EU’s 3 percent limit.
EU officials are speeding up efforts to agree a bailout package for Greece as the market turmoil caused by its fiscal crisis spreads through the southern euro region. Salgado urged European colleagues to be “clearer and faster” in lending aid to Greece as the situation is “generating instability” that’s affecting Spain, according to an interview published in Cinco Dias newspaper today.
S&P expects Spain’s economy to grow an average of 0.7 percent a year through 2016, and sees the jobless rate reaching 21 percent this year. The government forecasts 1.8 percent expansion next year, accelerating to 3.1 percent in 2013.
“I suspect employment will continue falling for most of the rest of this year,” said Ben May, an economist at Capital Economics Ltd. in London. “Clearly it has knock-on implications for fiscal policy.”
Jobless Benefits
The Socialist government has extended unemployment benefits for the long-term unemployed and 80 percent of those out of work receive some kind of subsidy, Labor Ministry data shows. Zapatero has pledged to maintain welfare payments even as he works to cut the budget shortfall.
Spain has some of the highest firing costs for open-ended contracts in Europe, according to the World Bank’s Doing Business Index, while around a quarter of the country’s workers have temporary contracts. The Bank of Spain says a labor-market overhaul is “urgent” as high unemployment poses a risk to banks and the Socialist government has pledged to change labor legislation after talks with unions and employers.
“If Spain maintains for a prolonged period these millions of workers out of jobs, the banking system could become an obstacle to achieving economic recovery after being a support for the economy during the crisis,” Bank of Spain Governor Miguel Angel Fernandez Ordonez said on April 13.
Banco Santander SA Chief Executive Officer Alfredo Saenz said yesterday that changes to labor rules should be carried out immediately.
The surge in unemployment is eroding support for Zapatero, who was re-elected in 2008 on pledges of full employment. The opposition People’s Party would win 40 percent of the vote, compared with 36.2 percent for the ruling Socialists, according to a poll by the state-run Center for Sociological Research carried out in January.
To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net”
If you would like to attend the event tonight you can contact me at Garyrumor2@yahoo.com or contact this blog.
Tags: ICC on French Attempt to Roll Back Worker Protection. C