Why some peoples are more unemployed than others

Part II – Twenty-five years later

Göran Therborn
University of Cambridge, UK, and Linnaeus University, Sweden 
 A Quarter of A Century Later

 In l986 I published a book trying to understand and explain Why Some Peoples Are More Unemployed Than Others (Spanish translation l989 Por qué en algunos países hay más paro que en otros) The starting-point was that the international economic crises of the mid-.l970s and early l980s had so different effects on unemployment in the rich OECD countries. The difference was stark to a Swede living in the Netherlands at that time, coming from a country where full employment was a universally accepted primary economic goal and was de facto well, if not completely, maintained in the crises, to country where general opinion, left and right, held that full employment had become impossible, and where the unemployment rate had run into two digits. There was more concern and much more divided opinions in the UK, where I had a temporary research fellowship in the mid-l980s, but there was two-digit unemployment there too. So what drove me to writing my first exploration of labour markets, primarily for a British and Dutch audience, was to create what Brecht called a Verfremdungseffekt, making the quotidian and the familiar strange, questionable, no longer natural.

 A main finding, based on robust empirical evidence but established by simple methods of economic sociology without any econometric modeling, was that straightforward economic lines of reasoning could not possibly explain the vast inter-country differences of unemployment. Combinations of GDP developments and labour force growth left about four fifths of the variation unexplained. World market dependence and labour cost development were also found powerless. 

 Instead, it appeared that politics was the decisive factor, above all in explaining membership of the low unemployment club, socio-political institutions, and policies derived from them. It was not a clear divide between left and right governments, nor were corporatist bargaining structures, a very popular research topic in the late l970s, a sufficient qualification for the club, as was obvious from a Dutch vantage-point. Rather, what was crucial was a politically institutionalized commitment to full employment, which of course had its roots in national histories, a commitment which could be, and actually was, deployed in a variety of policies, economic, labour market, educational, social. 

 Before re-connecting with that analysis, let us first take into view the economic and the labour market development of the OECD countries over the past decades.
 

Table 1. Economic Growth in the OECD countries 1950-2003. Annual growth rates
  1950-73  l973-2003
Western Europe 4.8  2.2
USA  3.9  2.9
Canada & Oceania 4.8  3.0
Japan  9.3  2.6
Source: A. Maddison, Contours of the World Economy, 1-2030 AD, Oxford, Oxford University Press, 2007, table A5.

 The mid-l970s crisis was a historical watershed.  It is noteworthy that the subsequent capitalist and neoliberal “globalization” has not had any growth-enhancing effects upon the rich countries. The average growth rate of what the World Bank calls the “High Income” countries, which is basically synonymous with the OECD of the l970s and l980s, in the period of 2000-2007 was 2.4% (World Bank, World Development Report 2009 p. 357).
 In spite of much slower labour force growth after the labour market entry of the post-World War II baby boom generation, high unemployment has come to stay.

Table 2.  Unemployment in the OECD Countries 1973-2010

Pre-Crisis 1973 3.3
Crisis troughs  Boom Peaks
• 1976 5.3  1979 5.1
• 1983 8.5  1990 6.1
• 1994 8.1  2000 6.2
• 2003 7.3  2007 5.7
• 2010 8.6

Source:  OECD.

 After l980, and the onslaught of neoliberalism, unemployment gets worse. “Flexibilization” of labour markets is leaving unemployment much higher than in l973 even at the top of business cycle booms.  On the other hand, there is no post-l980 trend, the rich world is not tendentially moving further away from full employment. 

 Before 1973, the OECD had two countries with a standardized unemployment above five per cent, Canada and Italy. In l976 they were joined by Belgium, Denmark, Netherlands, UK, and USA, the first to succumb to the new crisis. Then the early l980s added, by l983, Australia, Finland, France, Germany, Ireland, Portugal, and Spain. Left upholding more or less full employment were Austria, Japan, Norway, Sweden, and Switzerland. Those Eminent Five, and why they stood out from the rest,  were the focus of my study.

 The OECD Low Unemployment Club l986-2011

 What has happened to this club in the last quarter of a century? In fact, the members have had a divergent trajectory, in directions not all expected in the l980s.  Corporatist Austria, mostly governed by “grand” left-right coalitions, has had a single lapse in 2005, under a rightwing coalition for 2000-2006, allowing unemployment to rise to 5.2%.  It has weathered the recent crisis very well, with at most 4.5% unemployment, in the first quarter of 2011). Around l990 Japan fell from being heir-apparent to become world economy No. 1, to stagnant oldie.  In the l990s, well-organized  Japanese society managed to keep its membership of the low unemployment club nevertheless. But in the ensuring decade, there were lapses, in 2001-3 (with rates of 5.4-5-5), in 2009-10 (5.1%). In the spring of 2011 Japan is back in again, 4.6% in March and 4.7% in April. Even oil-rich and employment-committed Norway was hit by the regional Nordic financial crisis of the early l990s, and failed to pay its membership dues for l990-95, letting unemployment grow to 5.2-5.9%. But then it re-entered, and it has weathered the current crisis quite well, with an unemployment of 3.5% in 2010 and of 3.3% in April 2011. Switzerland, with its tightly controlled, at least to a third immigrant-supplied labour market, and a strong concern with economic and social order, has always been a member of the low unemployment club, and experienced only a modest rise recently, from 3.2% in 2008 to 4.2% in 2010. 

 The only exit is the Swedish one, perhaps the most unexpected, of a country repeatedly fêted for its world market competitiveness (as measured by the Geneva-based World Management Forum, for example), and for its pioneering “active labour market policies”, as well as for its solidaristic and egalitarian public orientations. . Sweden left the club in l992, never to return, on OECD terms. By national definitions, including people in “active labour market measures” as employed, Swedish unemployment went below the 5% mark in 2000-2003. But that turned out to be a temporary success of the then Social Democratic government.  At the end of the latter’s twelve-year reign, in 2006, the internationally standardized rate was 7.1%.  In April 2011 it stands at 7.9%.

Table 3. Employment and Unemployment in 1985-2010 among the l980s Low Unemployment Countries of the OECD. Index of total civilian employment,  1985=100; employment rate, per cent of population aged 15-64, internationally harmonized unemployment rate, per cent of the labour force.

Country E2000 E2010 E Rate 2009 Unemployment 2010
Austria 116 126 72 4.4
Japan 111 108 70 5.1
Norway 113 126 77 3.6
Sweden 97 106 72 8.4
Switzerland 123 136 79 4. 2

Sources:. OECD, Annual Labour Force Statistics; Employment Outlook 2010 (employment rates).

Switzerland,  Norway, and Austria are the best performers, even though the Swiss employment rate may be somewhat inflated by the country’s huge immigrant working population. Oil and gas rich Norway should be an employment leader, although the extraction itself does not generate much employment. In the period Norway has become the most prosperous country of the rich OECD world (after financial Luxemburg). Its GDP per capita, measured in purchasing parities, increased from 117 per cent of the OECD average in l987 to a peak of 178 in 2008 (169 in 2009). (USA stands at 138). Switzerland, by contrast, declined relatively GDP-wise from the mid-eighties until 2005, from 151 in l985 to 119 in 2005, before bouncing back to 136 in 2009. Swiss employment growth is therefore remarkable,qualified by the fact a fourth of employment is part-time. Growth continued even in 2009, although not quite as much as the labour force (OECD, Labour Forces Surveys, Summary tables Switzerland). The relative position of the Austrian economy illustrates a third trend, one of basic stability, oscillating between 120, in l996, and 113 in 2005.

The descent of Japanese employment after 2000, actually after l997 is also an expression of ageing, and not only of economic stagnation, as the employment rate is slightly higher in 2009 than in the mid-nineties. Japanese prosperity rose to 116 per cent of the OECD average in l990, followed by stagnation until l997, whereafter decline set in. In 2008 Japanese prosperity fell below the OECD average, reaching 97% in 2009. The Swedish employment index may not be absolutely exact numerically, as there have been minor calculation changes in the series, but national as well as international statistics concur in the dismal picture of the l990s. The only remaining redeeming feature of the Swedish labour market is the high employment rate, of 72 to be compared to the weighted OECD average of 65, or to the 2007 peak rate of Spain, 67%. In relative prosperity, Sweden fell from 121 in l985, to 117 in 1990  and to 108 in l993, climbing back to 111 in l995, and then staying slightly above that level, topping at 115 in 2000 and at 116 in 2007-8,, going back to 112 in 2009. (OECD, National Accounts at a Glance).

The Swedish Exit

How could the Swedish disaster of the early l990s  happen?  Why has had it so enduring labour market effects?

The historical jury is still out, but there are some obvious components. Swedish full employment was coming under pressure in the l970s and l980s, with inflation and rising labour costs imperiling a very world market dependent economy, leading to repeated currency devaluations. In subservience to neoliberal globalization, the Social Democratic lifted all controls of capital flows in l986. Ensued a bubble economy of easy credit and seemingly ever-soaring real estate prices. The Social Democratic government of the late l980s quietly abandoned paying primary attention to employment, focusing instead on inflation and on keeping a fixed exchange rate. Inflation brakes and the usual bubbles pricks soon punctuated the Swedish financial system, pushing the whole banking system to a bankrupt standstill, from which the taxpayers had to bail it out. 

 A bourgeois coalition came into office in l991, in the build-up of the crisis, in front of which it turned out to be completely helpless, having neither the nerves for a neoliberal assault nor the capacity to keep the economy afloat. The main legacy of that government was a huge public deficit, a precipitous fall of employment, and a run-up to two-digit unemployment. From a peak of l990 to a trough of l994, total employment in Sweden fell by one eighth. (Statistics Sweden, Labour Force Surveys) That was more than the Spanish decline of employment, from a peak in 2007 to a, perhaps, temporary trough in the first quarter of 2011, a decline of ten per cent.  No wonder that the country was also thrown off its demographic balance, pushing a fertility rate close to reproduction much further down, albeit not to current Mediterranean levels. 
 

Through an astute Social Democratic management, combining severe austerity with taxation stealth, Sweden recovered financially and economically in the second half of the l990s. But why it did not return to low unemployment remains an enigma, as the prevailing post-industrial structural explanations will not do, given the experience of other OECD countries. There is an argument developed by the political economist Torben Iversen (1999: 171-72), that the l950s-l960s Swedish so-called Rehn-Meidner model of full employment is no longer viable in economies dominated by service employment.  The classical postwar Swedish commitment to full employment was based on a solidaristic wage policy, putting a brake on wage developments in the dynamic industrial export sectors while pressuring the other sectors of the economy to growing productivity by refusing low-wage protection, and relying on mobility and training enhancing  labour market programs to prevent structrural unemployment. Now that employment growth mainly depends on low-skilled service employment, the argument goes, full employment comes to depend on expanding public employment of low-skilled workers, something which around the millennium turn, or before, has reached its limit in Sweden. (Cf. Anxo and Niklasson 2006:353ff)

In 2006 the Swedish Social democrats lost the parliamentary election, mainly over alleged complacency with respect to persistent unemployment and a sizeable, although by European standards modest, proportion of people in early retirement and on longterm sickness insurance. The “New Moderates”, great admirers of Blairite New Labour, successfully presented themselves as the legitimate heirs to the full employment Social Democracy of the l950s and l960s, forming a coalition with three small bourgeois parties. Having won again in 2010 this alliance is still governing. Though true liberal privateers of public services – with the taxpayers guaranteeing private profits -, the new government has in practice displayed a commitment to employment, by whip as well as by carrot. The hardest whip has been used on people on longterm sickness benefits, not only by cutting benefit levels but also by cutting them off altogether after a certain period. In a serious of public scandals, seriously sick, in some cases terminally ill, persons have been forced to “seek work”. Unemployment benefits have been reduced, while contributions to unemployment insurance have been raised. As the latter is  in Sweden administered by the unions but overwhelmingly financed by tax money, this has weakened the unions, stimulating workers to stay out.

Carrots have also been supplied, primarily by gradually lowering the income tax for the economically active, tax cuts cleverly targeting lower income earners. A good fiscal balance situation, inherited from the Social Democrats and buoyed by economic growth , has made this possible. Special tax deductions for household services employment, like cleaning, repairing, have also been introduced. The recent international crisis was met with a substantial fiscal stimulus and by an expansion of “active labour market measures”, of training and special job creations.(For a fuller policy exposé, see Anxo 2011.)

What note should given to the employment policies of this rightwing government, which after having borrowed from Blair in turn became a lender to David Cameron in his run-up to the 2010 election?   It has been neither a failure nor a success, approbatur would have been a proper note in an academic context. Total employment continued exactly the upward line which started in mid-2005 – the elections took place in September 2006 -, climbing up to the l990 amount in 2008. The employment rate in 2008 was only a hair’s breadth above that of 2000, and far below that of l990-91. People outside the labour force in 2010 is almost exactly the same number as in 2005 for the 16-64 age group, and 100,000 higher among the 15-74, in spite of 50-75,000 fewer outside because of sickness, in the crisis years of 2009-10 balanced by an increase of full-time students.  (Statistics Sweden, Labour Force Surveys).
Sweden was hit significantly by the current crisis, mainly through its industrial exports. The fears that major Swedish banks would get into trouble because of their Baltic exposure did not materialize, and some government support contributed. In 2009 the Swedish economy contracted 5.1%, and the country’s standing in relation to the OECD average GDP (in purchasing power parities) fell from 116 to 112. Total employment fell by about 3 per cent, and unemployment rose from 6.2% in 2008 to 8.4 in 2010, marginally less than OECD Europe, from 7.1 to 9.6, or the OECD total, from 6.1 to 8.6. The country seems to be recovering faster than many others. In the first quarter of 2011, Swedish unemployment had gone down to 7.7%, while OECD Europe stood at 9.4 and OECD as a whole at 8.3. (OECD, Labour Force Statistics). The total number employed in Sweden had in November 2010 returned to the peaks of l990 and of 2008. (Statistics Sweden. Labour Force Survey November 2010). While the latter must be held a good achievement, the unemployment record is neither bad nor brilliant.

Part of the Swedish social fabric was rent asunder around l990, under the impact of international capital deregulation, including a good deal of the corporatist industrial capitalism, of which the full employment model named after two trade union economists outside academia was part. The distribution of disposable income has become much more unequal, with the Gini coefficient rising dramatically from 23 in l995 to 29 in 2000, then the trend swanked with the dotcom crisis, before reaching 31 in 2007.  Like in unemployment, Sweden has lost its progressive edge of equality, becoming a Western European mediocrity. (Statistics Sweden, Undersökning av hushållens ekonomi, 2010).

However, post-industrial full employment, or put more cautiously, low unemployment is no chimera. We have already noticed above, that the four other members of the low unemployment club have continued to pay their dues. Of the four times 25 years since the mid-l980s of this club record, there were only ten years of unemployment exceeding five per cent, and none in the current crisis. And the record is not just one of four old-timers still holding out.

New Experiences of Low Unemployment

After l984, thirteen current OECD members  have registered periods of  low unemployment, below five percent. Six are countries for which standardized unemployment data were not available in the early 1980s, for various reasons. For Ireland, New Zealand and Portugal just because of statistical glitches of standardized comparability, for South Korea because it was not a member of the organization (only after 1996), and for the Czech Republic and for Slovenia because of two more reasons, because neither the country, nor a capitalist regime on its territory existed then. Seven are high or medium unemployment member countries of my study population of the early l980s, which later grew into low unemployment, for shorter or longer periods, Australia, Denmark, Finland, West Germany, Netherlands, UK, and USA. This means that, if we add the four of the five original members of the low unemployment club, eleven countries, more than two thirds  of my 1980s  sample of sixteen, have had long or short spells of low unemployment in the past 25 years, including the sample’s three largest economies, USA, Germany, and Japan.

Table 4. OECD Countries, Not in the Low Unemployment Group in l984 with Spells of Low Unemployment in 1985-2010. Calendar years of unemployment below five per cent.
  Years of Low Unemployment Unemployment 2010
Australia   2006-8  5.2
Czech Republic  1994-97, 2008 7.3
Denmark   2000-2, 2006-8 7.6
Finland   1988-90  8.4
West Germany  1990  7.1 (Unified Germany)
Ireland   2000-7  13.7
South Korea  1985-97, 2000-10 3.7
Netherlands   1998-2010  4.5
New Zealand  1985-7, 2003-8 6.5
Portugal   1990-2, 1999-2002 10.8
Slovenia   2008  8.1
United Kingdom  2001, 2003-5 7.8
USA   1997-2001, 2006-7 9.6
Source OECD, Annual Labour Force Statistics,
                     
Behind this picture we can safely assume several different forces at work. To unravel them all is obviously beyond the scope of this paper. But we may try to sort out some clusters, before taking a closer look at a couple of cases, most relevant to the current European debate.

One group of countries appears to have been driven by a sustained boom back to unemployment rates at least in the proximity of, but still higher than, their level before the l973-75 crisis. The Anglo-Saxon countries, Australia, Ireland, New Zealand, UK, and the US are good examples. They have all very liberal labour markets with minimal employee protection, though New Zealand added some from 2000 (OECD, Strictness of employment protection), and weak and weakening trade unions. Their record might be claimed as a neoliberal employment achievement, albeit a modest one after the high social costs of prolonged mass unemployment The American 1990s-2000s boom did not bring back US unemployment to the levels of the l960s, and the British New Labour achievement did not even return to the l975 level in the UK.  None of them has weathered the current crisis very well, except for Australia, whose employment kept growing, benefiting hugely from the incessant demand of its Chinese export market.

Ireland is a sub-variant of the above-mentioned cluster, with a long history of mass unemployment and outmigration. From the late l980s it managed to recast itself as a favourite venue of Europe-bound American investment, with low taxes, few rules, little labour protection, English language, and, originally, low wages. For two decades, before its crash in the current crisis, it was eminently and unexpectedly successful. Employment in 2008 was almost the double of that of l984, index 192 (l984=100). By the eve of the crash poor Ireland had become the third most prosperous country in Europe, after Luxemburg and Norway, at a level (in purchasing power parities)  almost on par with the United States. But then came the fall, From  2007 to 2009 Irish GDP per capita (in purchasing power parities) went from 137 % of the OECD average to 120, and in the first quarter of 2011 the Irish unemployment rate was 14.8%. – Canada, the remaining Anglo-Saxon country in the OECD,  was a high unemployment country even before l973, and it followed the rest of the cluster from behind, maximizing its post-l984 performance in 2006, with a 6.0% rate.

Booming back to a vicinity of pre-l973/75 low unemployment could also occur under the auspices of corporatist capitalism, strict employee protection, and substantial trade unions. Finland in the late l980s, before the collapse of its Soviet export market and the Nordic financial crisis, Portugal when basking in the EU sun of the l990s,  and, for a single year,  West Germany, before the costly absorption of East Germany, illustrate that variant. Portugal is now in deep trouble, and the Finnish economy and labour market were hit hard in the current crisis. While unified Germany has never managed to return to the full employment of the FRG and the GDR, it has coped with the recent crisis very well.  Germany is unique in the OECD of having a lower unemployment rate in 2010 than in 2007-8. Below we  shall look into why.

Post-Communism has not (yet) been much of an economic success for the population as a whole, of which unemployment is a fairly good indicator. But there are a couple of exceptions. Most remarkable is the Czech Republic, which alone among all the post-Communist states succeeded in maintaining basically full employment until the late l990s, at an employment to population ratio on the OECD average, and in bringing unemployment again below five per cent in 2008. The Czech lands were, with East Germany, the most economically developed and best organized part of Communist Europe, and their economy was not crushed by overwhelming West German competition. But how the Czech labour market managed to ride the storms of the transition to capitalism still seems far from clear.  Slovenia was the most developed and best organized part of Yugoslavia, and has grown significantly after the dislocations of the wars of Yugoslav succession, which directly touched Slovenia only briefly and lightly.

  The case of South Korea, is less surprising. It is socially a cohesively organized society, with paternalist big corporations, as such similar to Japan, whose model of relentless industrial export drive combined with tight controls of all domestic markets the Koreans have copied. With its now more dynamic economy, recovering from its blow by the IMF-amplified Asian monetary crisis of l997-8, Korea looks a more stable low unemployment country than Japan. – According to the Economist  (June 4th-10th 2011 p. 105), also Singapore and Taiwan sport low unemployment in early 2011.

Denmark and the Netherlands took  a new labour market direction after important changes of public policy involving innovative combinations of social concerns and liberalism. Denmark, always more liberal than its more strongly Social Democratic neighbours Norway and Sweden, did not have the two latter’s strong postwar commitment to full employment, although it did achieve it in the l960s. In the mid-l990s, under a Social Democratic government,  it developed a labour market policy which in many circles became a model of wisdom, “flexicurity”. Employee protection was strongly reduced, although not down to Anglo-Saxon levels, while unemployment benefits were kept the most generous in the OECD (Auer 2000: figure 3.5), but were no longer unlimited in time and were combined with training offers and active job-seeking requirements. It did work for a while, bringing unemployment below five per cent for 2000-2008, with a high rate of employment. But its “flexibility” has also meant a sharp rise of recent unemployment, from 3.3 in 2008 to 7.4 in 2010, and 7.5 in the first quarter of 2011. The unemployment jump is higher than the EU27, of 2.5 percentage points. Danish GDP, at -6.3,  also declined more than the OECD average for 2008-9, of 3.2 or the EU27 of 3.7%. While still keeping a lower unemployment rate than once full employment Sweden, Danish “flexicurity” can hardly be called an international star performance.

The Netherlands have made a both  dramatic and seemingly sustainable turnaround, from an insouciant high unemployment country to a low unemployment member ever since l997, including during the present crisis, with no quarterly figures above 4.5%. Below we shall return to the recent Dutch crisis coping.

Here there was a turn from a Catholic-cum-Labour generosity of out-of-work compensation to a neoliberal focus on labour incentives, concerned with the longterm sustainability of the Dutch welfare state, implemented with a national social finesse of part-time and other flexible employment. By 1999 forty per cent of Dutch employment was part time, in 2009 almost half of all employment, 48 per cent was. The Netherlands is the only country where there is also a significant male contingent of part-timers.

On these terms, Dutch employment has risen, by 59 per cent since l985, far above US proportions, for example, of 36 per cent  but less than Spanish employment growth, by 85% from l985 to 2008 (OECD, Labour Force Statistics),.   The rate of employment, among the population aged 15-64, has augmented strongly, 63.9% in l994 (then OECD average) to 75.8% in 2009, well above a weighted average of  64.8. (OECD, Employment Outlook 2010, table B.)

  
 No Single Market: The Uneven Effects of the Current Crisis

            From a European perspective, arguably the most noteworthy, and perhaps unexpected, effect of the 2008 financial crisis was its unevenness. It suddenly became obvious that the European Union was no “single market”. Four European countries suffered double-digit GDP losses, accumulated over one (Lithuania), two (Estonia ) or three years (Ireland, Latvia). Lithuania’s southern neighbour, Poland, on the other hand, continued to grow, at least by 1.7%. Within Euroland all members had a GDP drop, but ranging from 2.5 in Portugal (for 2009), and 2.8 in Belgium and France, to 12.1 in Ireland and 6.5 in Greece.

 Unemployment effects have been very divergent, and little linked to GDP changes.. After a slight 0.3% increase in 2009, Germany came out of the crisis in 2010 with an unemployment rate lower than before, 7.1 as against 7.5 in 2008 and 8.7 in 2007, in spite of a GDP dip of 4.7% in 2009. Small increases, of at most 1 per cent, occurred in Austria, Norway, and Switzerland. Below the EU average have also been, Belgium, France, Italy, Netherlands, Romania, and, just barely at 2.2% increase, Finland, Sweden, and the UK. At the other, unhappy, end are Spain, + 11.8 per cent from 2007 to 2010, and the GDP crashers, Estonia +12.2, Ireland +9.1, Latvia  +12.7, Lithuania +13.5.

So far, the Euro patients Greece and Portugal have suffered less unemployment rises, 6.4% in Greece and 3.4% in Portugal by the first quarter of 2011. In spite of its ongoing GDP growth, Polish unemployment rose at the EU average of 2.5% between 2008 and 2010. (OECD, Stat Extracts; Eurostat, unemployment and GDP statistics).

 National time frames have also varied, although the trough of the general crisis was in 2009 in some countries a decline began already in 2008. Recovery mostly began in 2010, but in several countries the crisis deepened. The intra-European variations unsurprisingly have their equivalents in the OECD – but without the European disasters of income and employment.

 Table 5. EU and OECD Unemployment in 2008 and in the first quarter of 2011, Internationally Harmonized Rates 
  2008   2011
Australia  4.2   5.0
Austria  3.8   4.5
Belgium  7.0   7.7
Bulgaria  5.6   10.2 (2010)
Canada  6.1   7.7
Czech Republic 4.4   7.0
Denmark  3.3   7.9 (Jan.-Febr)
Estonia  5.6   14.3 (Q4 2010)
Finland  6.4   8.2
France  7.8   9.5
Germany  7.6   6.4
Greece  7.7   14.1 (Q4 2010)
Hungary  7.8   12.1
Ireland  6.3   14.8
Italy  6.8   8.3
Japan  4.0   4.7
Korea  3.2   3.9
Latvia  7.5   18.7 (2010)
Lithuania  5.8   17.8 (2010)
Netherlands  3.1   4.3
New Zealand 4.2   6.6
Norway  2.5   3.2 (January)
Poland  7.2   9.8
Portugal  7.7   11.1
Romania  5.8   7.3
Slovak Republic 9.5   14.0
Slovenia  4.4   8.1
Spain  11.4   20.6
Sweden  6.2   7.9
Switzerland  3.2   3.9
United Kingdom 5.6   7.8
USA  5.8   9.6
Euroland17  7.7   9.9
EU27  7.1   9.5
OECD  6.1   8.3
Source: , Eurostat, European Labour Force Survey; OECD, Labour Force Statistics. 

Among the 32 countries listed – from the OECD roster I have taken out Chile and Mexico as I am unclear how their “informal” economic sector is coped with, and Iceland and Luxemburg, together with Cyprus and Malta from the EU ranks,  as so small to be very specific – five maintained  full membership of the low unemployment group throughout the current crisis, Austria, Korea, Netherlands Norway, and Switzerland. Japan took a short timeout, but is back again in early 2011 a seventh, Australia, is sitting at the gate with a one-month (March 2011) qualification  of 4.9% unemployed. On the other hand, a third, ten countries, all European,  are stranded with two-digit unemployment.

In other words, the different national labour market outcomes from a deep international crisis remain as much of a challenge to conventional economic policy wisdom as twenty-five years ago. Now as well as then, I am convinced that the answers are to be found in institutionalized socio-political commitments and their manifestations in public policy-making and in norms and behaviour of capital and labour, of the “labour market parties” (not partners) as they are called in Scandinavia.

This paper has no time and space to explore fully the labyrinthine labour market paths, which have led up to the picture of table 5 above. What will be done in the rest of this paper are three things. First, the very uneven effects of the crisis calls for some attempt, however provisional, at getting at least the contours of the crisis pattern, with a focus on Europe. Secondly, we shall take an inter-social rather than an inter-national look at the labour markets. How have two major  social categories fared? Finally, we shall give some answers to the very big questions, What can be leant from the current crisis?

Contour of  Contagions  of A Financial Epidemic

The crisis started as an Anglo-Saxon financial explosion, caused by  over-extended banks recklessly stoking a real estate fire. Like most Anglo-Saxon endeavours after World War II, this one began in the United States, closely followed by the UK, where the financial sector occupies an extraordinarily large part of the national economy. Nevertheless, the hardest hit were not the sources of the crisis, cushioned by massive public bail-outs, but more vulnerable bubble economies, without states willing or capable of intervening against collapsing real estate, construction, and consumer credit  markets, the Baltics, spoonfed by Swedish banks, and Ireland in particular. Estonia and Latvia had more than a fifth of their GDP wiped out from the first quarter of 2008 and the third quarter of 2009.  Ireland lost an eighth.

GDP-wise, small, open, export-dependent economies, like Denmark, Finland, Slovenia, and Sweden were hit harder than the US-UK culprits, in spite of having their public and their private finances in order, except for the Scandinavian private Baltic exposure. Austria, Belgium, and the Netherlands were much more spared. On the other hand, in terms of employment, the US contraction between 2008 and 2010 is larger than that of the EU, 4.3% as compared to 2.3. The British decrease is also slightly bigger, 2.4%. Danish “flexibility” spawned a substantial decline of employment, by 5.2%. But  on New Year’s Eve in 2010 Swedish employment was down only 0.9%, Austrian was up 0.1, as was by 0.2%, employment in Belgium, one of the mass unemployment countries of the 1980s.

Anglo-Saxon bankers brought about the crisis, but generally speaking it is mostly manufacturing and construction workers, Continental European as well as Anglo-Saxon,  who have had to pay for it. In the EU 27 employment in “financial intermediation; real estate” started to recover in the third quarter of 2009 and was by the end of 2010 above  its level of the second quarter of 2008 and almost back to its third quarter 2008 standing. Manufacturing employment, by contrast, was down 9.2% as compared to the third quarter 2008, and construction by 11.3 per cent (Eurostat, Quarterly National Accounts by 6 branches – employment data). Total service employment in the EU kept growing throughout the crisis. Spanish service employment did dip only slightly, by 2.8% from 2008 to 2010, about the same as the US number, minus 2.2% (OECD, Labour Force Statistics, Employment Industry)

After 2009, the crisis took a new turn. Greece and Portugal, which first had weathered the crisis better than most, were assaulted by bond-holders distrusting their public finance. Trapped in the Eurozone, which Greece had never really qualified for, their only option available became an expensive EU-IMF bailout, requiring lower income for wage-earners, public employees, and pensioners, and a sell out of public assets. Ireland, driven to frenzy by Anglo-Saxon finance, was in the original fireline. But it got a new dimension, after the government put public finance in peril by supporting the bankrupt private banks.
Spain represents another path of the epidemic contagion, a path of pronounced labour market disaster. Spanish GDP contraction between the first quarter of 2008 and the third quarter of 2009 was about Euroland average, 4.4% as against 4.2. But employment change in Spain was 9.4 percentage points, to be compared to 1.6% in Eurolamd. (GDP and employment changes from Bell and Blanchflower 2011: table 2). In annual terms, Spain had a GDP decline below the EU average, 3.7% as against 4.3 (in 2009), but its unemployment increased more than four times that of the EU.

This indicates a particular economic and labour market development, which Spanish observes are no doubt analyzing in detail (Cf. Muñoz de Bustillo Llorente and Pérez 2011). That is, an economy fed by construction and real estate speculation, with significant flows of foreign capital flowing to stoke the engines, and a starkly dualistic labour market, with strong protection of insiders and almost uniquely extensive use of temporary contract employment, for whom employers would take no responsibility in a crisis downturn.

 Poland is establishing itself as the main hub of post.-Communist Eastern European capitalism, bracing itself for export production more than for credit consumption. In overall economic terms it has survived the international crisis very well, including in terms of employment growth. But from its “shock therapy” birth it has inherited a high unemployment, importantly  relieved by mid-l990s emigration, but still, in spite of a lucky crisis, above the EU average. 

 The two central economies of the EU, Germany and France differed among themselves. The GDP effect in France was small, -2.8 per cent on an annual basis, and so was its unemployment rise. Germany was knocked harder in 2009 than the EU, but then more than recovered, as we noticed above.

 From Sexism to Ageism

 The crisis has had a gender dimension. Generally speaking, employment has declined more and unemployment risen more among men than among women. This is mainly an effect of occupational gender segregation, with males dominating worst the crisis-hit branches of the economy, manufacturing and construction. In 2009-10 female employment in the EU declined by 1%, and among  males by 3.3%.(Eurostat, Employment growth by gender). 

 The main gender story of European labour markets, though, is a male-female convergence, a convergence of employment as well as of unemployment rates. Among the EU15 the gender gap of employment (as proportion of the population) was 23 percentage points in l992 and 12 points in 2010. Among the EU27 the gap was 19 percentage points in l997, and 12 in 2010. In Spain the gender gap was 36 in l992 and 12 in 2010, and in the Netherlands the move has been from 24 to 11. In Scandinavia the gender gap  is less than 5, in Finland 2.5. Still, large cross-country differences in female employment persist, with a range from 46-48 per cent in Italy and Greece to 70-73 in Scandinavia.

 Age-stratification is becoming more inter-nationally variable as well as more important in crises.

 Table 6. Employment Rates by Age, 2009.Per cent employed of the age group.
   Age 20-24  Age 55-64
Austria   69  41
France   50  39
Germany   63  56 
Japan   63  66
Netherlands   77  53
Norway   68  69
Spain   44  44
Sweden   57  70
Switzerland   73  68
UK   63  58
US   62  61
Source: OECD, Labour Force Surveys by sex and age. 

 Cross-country age differences of employment have become larger than gender ones. Looking at the two tail-ends of adulthood, we find that all three logical possibilities are represented in reality, more youth employment in Austria, France, and the Netherlands, more senior employment in Sweden, and a basic age balance in the other countries. Senior people of Sweden maintained their employment quite well in the crisis, in contrast to most countries. Sweden is a country for old men (and women). 

 In the present crisis, young people have been the main victims. Generally, their rate of unemployment is two-three times above the population average. Two countries are particularly discriminating against youth, Italy and Sweden. In the l980s and l990s Italy was worse than Sweden, but in the crisis and just before, Sweden was screwing young people harder. In October 2010, youth unemployment (<25) was 4.2 times higher than the general rate, in Italy 3.8, to be compared with 3.2 in the UK, 3 in France, and 2.3 in USA. (Bell and Blanchflower 2011a: table 3).

Standing out at the other end is Germany, with youth unemployment only 1.3 times that of the general population. In contrast to the comprehensive schooling in Sweden, now being eroded by privateering, the German education system is very class-streamed, but through an institutionalized apprentice system, fully upheld through the crisis– helped by the demographic luck of a smaller cohort of labour market entrants in 2009 – (Bosch 2011:274ff), it is well connected to the labour market.

Youth experiences of unemployment have been found to leave lasting scars in life, resulting decades later in more unhappiness and malaise, worse health, lower income, and higher risks of new unemployment (Bell and Blanchflower 2011a:11-12; 11b: 14ff)

 Life-long Learning: Lessons from the Current Crisis

 Twenty-five years later, one crucial finding of my 1980s study is still standing, tall and irrefutable. Full employment is neither a utopia nor a foreign country of a bygone past. It is a contemporary reality, even under crisis pressures. By early 2011 there were three prosperous countries with an unemployment rate below four per cent, Korea, Norway, and Switzerland, and four more below five per cent, Australia, Austria, Japan, and Netherlands. One country, Germany, has been able to reduce its unemployment in the crisis, in spite of a sharp economic rap in 2009. Permanent high unemployment is still no more than bad practice and ideology.

 The very different economics, sociology, and politics of these success stories indicate that searches for general explanations and for simple, replicable recipes are likely to yield meager results. Attention will have to be paid to particular institutions, historical experiences, positioning in the world economy,  interpretations of the world, constellations of social forces, and policy mixes – while not excluding interventions of luck. 

 However, now speaking to politicians as well as to fellow citizens, some Don’ts and some Dos may be sifted from the evidence, of which only a fraction of what is available has been used here, and in a provisional manner.

 Don’t believe that the neoliberal doctrine is a recipe for enduring success, through de-regulation of capital and labour markets, state subservience to private interests, and union-bashing. The evidence marshalled above has shown that neoliberalism is not reducible to an ideology of evil, as seen from the left. We have noticed the employment achievements of Anglo-Saxon neoliberalism, in boom times, with tailwind. But it is a road to bubbles economics, and the most spectacular crashes of GDP as well as of employment have been concentrated on the most neoliberal economies of Europe, Ireland and the Baltics. 

 Don’t believe that taking out employee protection is a way to keep up low unemployment. The most successful labour market countries all provide more employee protection than the US and the UK, and the most successful Anglo-Saxon country, Australia,  has the highest employee protection among the Anglo-Saxons (OECD, Strictmess of employment protection) 

 Don’t believe that the rosy skies promised by uncontrolled finance sharks and real estate speculators will last forever. On the contrary, their activities augment the volatility of all economic undertakings. 

 Don’t push a labour market of outsourced temporary employment. The temps are bound to become the main victims of the next economic crisis, as the recent Spanish experience shows, if not uniquely then, better than most. 

 But, in the end, What is to be done?, as the Russian novelist Chernyshevsky and after him Lenin, once famously asked. Do be concerned with social cohesion, and with its prerequisites of fairness and trustworthiness, as it provides an enormous resource of collective action in times of stress and crisis. The labour market success countries of Europe and Asia have all nurtured and maintained their cohesiveness, although immigration and xenophobia have recently put it under pressure.

 Do remember that the classical recipes against recession unemployment are still valid. Fiscal stimuli – crucial in the US-UK cases, very important in Germany and other places -, expansion of education and of vocational training, and special job offers, so-called active labour market measures (de Koning and Mosley 2001). It is remarkable, but an illustration of the havoc of neoliberalism,  that the simple idea of long-term counter-cyclical public investment planning has not been institutionalized, identifying desirable investments, in say, e.g., fast trains, metropolitan transit, large-scale urban redevelopments, and targeting them for the next recession, or the one after that. 

 Do absorb the main, and the novel lesson of this crisis, the flexible management of working-time. The idea of work-sharing in crises is an old one in the labour movement, to which the Swedish trade unions have always been adamantly opposed, ever since the European trade union meeting in Vienna in l931. It was very much around on the Western European continent in the l980s, generating massive early retirement schemes and, in Socialist France, the 35-hour week. It turned out little effective in avoiding unemployment, and the early retirement arrangements became with time quite costly. Neither general working-time reduction nor early retirement has been prominent in the present crisis.

 Instead, large-scale organizing of temporary working-time shortening among employees has been resorted to, after trade union-employer negotiations, in consensual forms, and, where most successful backed up by state support. This is clearly the key to the labour market success of Austria (Vaughan-Whitehead 2011), Germany), and Netherlands, and possibly Switzerland.

In Germany, 90 per cent of reduction of labour inputs after the crisis shock consisted of employees working fewer hours, instead of being laid off, an alternative massively supported by state subsidies. (Bosch 2011:.260) The costs of short-time working in 2009 were shared between the state (the Federal Labour Agency) 43%, the employers, 36%, and employees 21% (Bosch 2011:.267). In the Netherlands, between the second quarter of 2008 and that of 2010 persons employment declined by 1.1% only, while the working hours they put in went down by 5.2% (Salverda 2011:365) Netherlands has the lowest proportion of industrial employment of all OECD countries, 16.6% in 2009, and, with USA, the highest proportion of service employment. Given the branch effects of the crisis, this employment structure has been an advantage. But it has also been argued to facilitate generally flexible working.-time arrangements (Salverda 2011: 369-70). In other words, pronouncedly postindustrial economies may have better possibilities than more industrial ones of providing employment for everybody. – Flexible working-time can also be arranged over the life-course, and involving not only hours but also months and years. Belgium and the Netherlands have been trail-blazers in this respect (Schmid 2008:258-62).

This kind of flexible hours  and years  labour market presupposes some kind of a stable employer-employee relation. Temps were just dismissed in the crisis, in Germany and the Netherlands, as in Spain. Fortunately they were much fewer in the former countries than in the latter, but German capital is undermining the German labour market by increasing outsourcing and use of easily dismissible temps, supported by the rightwing government’s refusal to institute a decent minimum wage.

The Dutch culture of pervasive less than full-time employment, discernible already in the l980s, and the broader Central European crisis coping by negotiated limitations of labour inputs are important new contributions to better functioning labour markets, and to avoiding the life-long scars of unemployment.
 

 
 
References 
Sources
Eurostat  http://epp.eurostat.ec.europa.eu
  Labour Force Surveys, National Accounts
OECD     http://stats.oecd.org/Index
Labour Force Surveys, National Accounts. Employment Protection
OECD, Employment Outlook 2010. Paris, OECD
Statistics Sweden http://www.scb.se
  Labour Force Surveys, Income statistics
World Bank, World Development Report 2009. Washington D.C. 2009
 
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