More than a quarter of a million jobs were lost in the Eurozone in January 2009, taking the overall unemployment level to 8.2%. It was the tenth consecutive month of rising unemployment, meaning 13 million people in the 16-state zone are out of work.
The figures for the EU as a whole, are not much better, with unemployment rising to 7.6%, with 386,000 jobs lost in January.
The Netherlands and Austria are the best performers, with unemployment levels of 2.8% and 4% respectively. Spain is the worst hit, with unemployment standing at 14.8%, partly due to lay-offs in their swollen construction industry.
Europe is struggling to keep its head above water, but unemployment is rising less quickly than in the US. Half the EU member countries have unemployment rates lower than America’s and it is interesting to compare the differing attitudes to unemployment.
Europe’s governments are used to being told that they need to make their labour markets more like America’s, with greater flexibility in hiring and firing, lower taxes and lower welfare benefits, to cut unemployment levels.
Compared with other industrialised countries, the US unemployment-insurance scheme pays lower benefits for less time and to fewer people. In boom times, this encourages the unemployed to return to work quickly, but in a recession, with fewer employment opportunities, it causes hardships.
In the States, people usually need to have worked or earned an amount that disqualifies many part-time and low-wage earners and benefits last for only six months.
Ronald Reagan may have said: “Unemployment insurance is a pre-paid vacation for freeloaders,” but it is an important stabiliser, helping maintain household purchasing power when an economy weakens, but has little effect if too low and for too little time.
Unemployment in the US has reached 5.5%; 8.5 million Americans are out of work and the great American jobs’ machine is sputtering. Talking about congress’ options to extend benefits, a recent article in the Washington Post says: “In Europe, lush unemployment benefits have created long term joblessness, but extending unemployment benefits from 26 to 39 weeks would hardly institutionalize sloth.”
Unemployment benefit is considered a painful trade-off. It is the mark of a civilised society, giving assistance to people in need, but it can also be an incentive to remain unemployed, at its worst paying people to stay at home, watching daytime television.
The OECD says its member governments spent, on average, 0.75% of GDP on unemployment benefits in 2006. France spent nearly twice this amount, Germany three times as much and the UK spent just over a quarter and the US a third of the average.
It does appear that increasing benefits leads to longer periods between jobs, but Berkely economist, Raj Chetty, says unemployment benefit does not just pay people to stay out of work, but also protects them from having to rush into an unsuitable job.
The International Labour Organization (ILO), estimates 75% of the world’s 150 million unemployed have no unemployment protection and that the most generous systems are provided by Austria, Belgium, Denmark, Finland, France, Germany, Netherlands, Norway, Portugal, Spain, Sweden and Switzerland.
The ILO says Australia, Canada, Ireland, Japan, New Zealand, the UK and the US have “medium-level type systems,” with fewer people receiving benefits and for a shorter period of time. In the “medium level” countries, benefit payments vary from 23% of wages in New Zealand to 58% in Canada and the US.
“Top level” countries, such as Finland and Spain, provide 63% and 70% respectively of national average earnings in their unemployment insurance.
In his book, Respect: The Formation of Character in an Age of Inequality, Richard Sennett analyses the role of work in society. He asks how the welfare-dependent can achieve self-respect and considers how ideas like the dignity of labour and the protestant work ethic are contrary to the concept of respect for the unemployed and that both are actually historical curiosities.
In the ancient world, labour was something done by slaves, with freemen staying aloof. The strange concept that work is inherently good and leisure a guilty indulgence, did not arrive in the western world until the 19th century. It carries the assumption that to be dependent is shameful and infantile; the mark of adulthood is to earn one’s living.
Sennett is not optimistic about the future of welfare in Europe or America. The 1970s’ view that institutionalisation was evil, provided the pretext for closing asylums, reform schools and geriatric homes, with a consequent surge in the homeless and disorientated on the streets.
He says the trend to downsize the welfare state will mean fewer teachers, doctors and social workers and the cut in time people can receive benefits in the US and Europe, show a change in the moral climate.
Welfare to work sounds like a healthy alternative to dependence, but the work available to former welfare clients is usually low skill and short-term, which may not alleviate the hunger for respect.
The first unemployment benefit schemes were introduced by the trade guilds of Basel, in Switzerland, in 1789. The first compulsory national scheme was started in the UK in 1911 and, by the early 1930s, 19 European nations had compulsory unemployment benefit programmes.
There is no European Union set of rules regarding unemployment and the criteria and government approach vary by market, but the situation in Europe protects the individual’s right of free movement. All migrant workers from EU member states, working in another member state, have the right to the same benefits of social security as local employees.
Unemployment benefits are a safety net and Anastasia de Waal, head of family research at the social affairs think tank, Civitas, believes families can provide the support needed. She says: “Strong family networks are vital for a healthy society, but are increasingly vulnerable in Britain.”
A Civitas study showed people in Britain were least likely to live near relatives or share a home with family members. Spanish families are three times more likely to have children over 25 living at home and unemployed Italians are nine times more likely to be helped by relations than in Britain, where only one in 100 receives family help.
Three times as many unemployed Britons claim benefits, compared with Italy. 9% of unemployed Italians received financial help from relatives, compared with 5% in Spain, 3% in America and just 1% in Britain.
European Unemployment Benefits
In the UK, the number of unemployed people being interviewed to claim benefit, has doubled in the last six months. Jobcentres are handling 400,000 interviews a month, twice last July’s figure.
At over two million, the jobless figure is at a ten year high and the government has announced that it is going to help Jobcentres find work for sacked executives, investing €50 million to help unemployed professionals. They will get one-to-one meetings with a personal advisor and can attend “job clubs” with people in a similar position.
They are also thinking of fast-tracking professionals into the teaching profession, reducing the 12 month training period to six months for suitable candidates.
The current recession is claiming jobs at every level and a lot of executives are finding themselves out of work for the first time. In the past they may have moved seamlessly from one job to another, often being headhunted, but now the rules have changed and many find themselves unsure of where to turn or what to do next.
Over the past decade, Spain created more jobs than any other European country, but in 2008, over a million people were made redundant and the jobless rate is nudging 15%. Its level of unemployment, at three million, is the same as Germany, which has a population 80% larger.
Spanish prime minister, Jose Luis Zapatero, is offering immigrants lump-sum payments to go home. There are five million immigrant workers in Spain, so this could be a very expensive gesture.
Italian professionals receive no governmental support if they lose their job, but may receive outplacement assistance as part of a severance package and have to increase their networking efforts, joining groups where professionals can help each other.
Alessandro Tosi, ExecutiveSurf’s Italian co-founder, says: “In my opinion, the real opportunity in Italy is interim management, particularly if potential employers are small to medium enterprises. They may be unwilling or unable to hire a director, but can take on a senior professional on a project by project basis.”
The Dutch government has proposed that, from July 2009, anyone who has been unemployed for over a year, must accept any job they are offered. They have also approved a scheme, whereby companies can force employees to work fewer hours. To qualify, company turnover must have gone down 30% over a period of two months.
The Dutch government has also set up 33 “mobility” centres, which travel around, helping people find employment. They have also frozen company taxes. The Polish government is investing extra into the ‘job fund’ to help the unemployed and are providing specialist training courses.
Dennis Snower, president of the Institute for World Economics, in Kiel, says European unemployment could be cut by 50%, if traditional jobless benefits were replaced by individually tailored insurance schemes.
When working, people would pay contributions into “unemployment accounts,” which they could access if they lost their job. Snower says this would significantly increase incentives to seek or remain in work. At the end of their working lives, they could transfer the remaining balance into their pension.
Economists at the Kiel Institute think a shift from conventional unemployment benefits, to a system of accounts, would reduce Germany’s unemployment rate by 50%, France’s by 46% and Spain’s 38%.
Many professionals have outgoings like mortgages, credit cards and school fees that need to be paid each month. ‘Loss of income insurance’ can give them peace of mind; if they are made unemployed, their major expenditures will be paid for a fixed period of time.
Companies, like ExecutiveSurf, can come in once someone loses a job and guide them through the steps that will help them get back to employment, secure in the knowledge that their essential costs are being met.