European labour markets in the crisis: What lessons?

Transcription

1 European labour markets in the crisis: What lessons? Andrew Watt, Deputy director, Macroeconomic Policy Institute (IMK) Conference Progressive policies for growth and employment (ECLM, LO-DK, FEPS), Copenhagen, 8 May

2 Overview n Unemployment trends in Europe during the crisis n It s the macroeconomy, stupid n National performance: labour market buffers n Working time in Germany n Some policy conclusions 2 Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)

3 Unemployment higher than ever despite structural reforms Unemployment rate, EU-15, % 3

4 Snatching defeat from the jaws of victory Unemployment rate, EU-27, monthly change, in thous. 4

5 iags 2014 Double dip and bleak recovery prospects n n n 7.9 millions more unemployed at the peak (end 2013) than in late 2007 A decrease of only 1.2 million to be expected up to 2015 It will take 13 years to be back at the 2007 level of unemployment 20,000 '000 unemployed 15,000 Other Southern countries 10,000 Spain Italy 5,000 France Other Nothern countries Germany project.org Source: Eurostat, iags forecast, Nov Refer to chapter 1 of iags 2014 for details

6 Huge national variation Unemployment rates, % (Eurostat) 6

7 Risk of longer-term losses Long-term unemployment rates, % (Eurostat, iags 2014) 7

8 Risk of longer-term losses Youth unemployment rates, % (Eurostat, iags 2014) 8

9 Stating the obvious n Unemployment and employment performance primarily a result of macroeconomic trends n No growth no employment n Employment outcomes today reflect primarily developments within euro area whose origins lie in financial market and euro-area architectural problems, not labour markets n High risk of cyclical unemployment becoming structural n But 9 Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)

10 Buffers between output and unemployment 10

11 Labour hoarding/productivity buffer 11

12 Working time buffer 12

13 Kurzarbeit in Germany Source: Herzog-Stein, Horn, Stein (2013) 13

14 Not just Kurzarbeit n Increase in part-time work n Reduction of overtime n Use of working time accounts 14 Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)

15 Labour supply/ ALMP buffer n Rather ambiguous n Hiding unemployment n Parking unemployed n Genuine labour-capacity-maintaining measures n Less important in short run than working time buffer, but more in longer run 15 Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)

16 Predominant adjustment and reform strategy n Austerity n Internal devaluation and cost competitiveness n Reform of collective wage-setting n Shrinking of public sector n Labour market deregulation (EPL, unemployment benefits) 16 Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)

17 17 Alternative approach macro and EU level n Expansionary policies generally (QE) n Adjustment by surplus countries (DE) n Some limited progress n Public investment programme n Stronger automatic stabilisers n Wage coordination n European minimum wage norm? n EU unemployment insurance (top-up)? n Youth guarantee (symbolic politics?) Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)

18 18 Favourable institutional features national level n EPL can be helpful in slowing adjustment n But avoid duality n Pre-existing short-time working schemes n Institutional structure in place n Rapid expansion and subsequent reduction n Care where job loss is permanent n Working time accounts? n ALMP rather than labour supply reductions n Separate ALMP and UB financing Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)

19 Labour migration a challenge for progressive policy n Potentially valuable adjustment mechanism n Source of political tension and anti-eu sentiments n Issues n Brain drain n Undermining fiscal capacity n Undermining of standards n Unproductive allocation of labour n Welfare tourism 19 Fußzeile ändern/ausblenden unter: Ansicht > Kopf- und Fußzeile (Alt > a > u)