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News Story:

Unearthing the roots of unemployment


Unearthing the roots of unemployment Over 10% of the European Union’s working age population is now unemployed and this climbs to 22.4% for those under the age of 25. But is unemployment simply the outcome of the economic downturn or are other important factors at work?

It is well known that unemployment is generally linked to low levels of education and this is certainly the case in every EU member state. Across the EU as a whole 44.6% of those with only basic secondary education are in work, this climbs to 68.1% for those with higher school and intermediate qualifications and to 81.8% for those educated at a tertiary (University) level. Even so, countries differ significantly in the employment prospects for those with the lowest levels of education – with the Netherlands (60.4%) and Portugal (58.2%) offering better prospects for this group.

The most significant factor in unemployment, however, is the region or country where people live. 28% of all unemployed people in the European Union live in Spain and high unemployment exists in every Spanish region. Capital cities are often seen as a magnet for unemployed people and therefore could be expected to have higher than average` unemployment rates. But this is not invariably the case. For example – although the rate in Brussels, the capital of Belgium, is much higher (17.3%) than for the country as a whole (7.2%), the same is not the case in France where the Ile-de-France around Paris (8.4%) has a lower rate than for the country as a whole (10.0%).

The pattern of unemployment across Europe is far from uniform. In fact, outside Spain unemployment rates vary from 2.6% to 18.7%. The four regions in the EU with less than 3% adult unemployment are in Austria, Italy and the Netherlands. Outside the EU there are also two other regions with an exceptionally low unemployment rate and these are located in Norway and Switzerland. What five of the six regions have most in common is that they all lie within mountainous zones – regions often most associated with poor employment prospects. In the sixth case (the Dutch polder region of Zeeland) the terrain is at the other extreme with its land being partly below sea level.  Although such regions may export much of their unemployment to other regions, there is little evidence that this is a major factor across Europe. For example unemployment remains exceptionally high in Lithuania even though it is undergoing the highest level of depopulation in the `EU – losing 2% of its population in 2011 alone.

What low unemployment regions teach us is that good natural resources, communications, a pleasant climate and even high educational levels are less significant than the hardiness of the population. Mountain peoples tend to be more resourceful, frequently having more than one job and making the most of seasonal variations.

The fact that climate is a very significant fact in economic development and the growth/decline of civilisations is very evident in human history. Ancient civilisations in the Mediterranean regions of Egypt and Greece emerged through a reliance on slave labour. Colonialism allowed countries to continue exploiting slave labour even though the colonising country had a less favourable climate. The growth of the industrial revolution and increasing practice of adding value in the colonising country (such as importing cotton from America to UK cotton mills) meant that economic growth continued to be highest in the Lancashire-Ruhr belt – which continues even today to have the highest level of urbanisation in Europe.

A temperate climate has log been associated with high economic growth. But dominant regions in the first (factory production through divisions of labour) and second (mass production) industrial revolutions are struggling to adapt to flexible automation and the coming third wave of industrialisation (mass customisation). Major structural changes are therefore at work which is adversely affecting regions with the oldest capital infrastructures and placing at an advantage many previously economically undeveloped regions. That is perhaps why Ireland was able to develop so rapidly from a rural backwater into a tiger economy during the 1990s – a course of development that was only halted by runaway property prices and massive government spending following the world recession in 2008-10.

It should not be forgotten that unemployment is also a factor in falling demand itself. Those on unemployment benefit are no longer strong consumers, contribute little to tax receipts and are a net drain upon pubic spending – which could otherwise be directed towards critical infrastructure projects.

At a meeting of top international employers today Robin Chater, Secretary-General of the Federatiuon of European Employers (FedEE) pointed out that:

" High unemployment is not a simple outcome of falling demand, but arises from a number of factors – the most important of which are structural changes in the currently most industrialised regions and the attitudes of workforces to the prospect of unemployment.”

Robin Chater also observed that ....

"The last 50 years has seen a massive amount of EU funding has gone into agriculture and the least economically developed regions. This has not stopped a progressive fall in agricultural employment - although it has allowed several least favoured region to thrive in the face of the recent downturn.”

Looking to the future he called on the EU and national governments to ...

"Direct far more resources to industrial regeneration in the traditional industrial heartlands of Europe.  The emphasis in education should also move away from maximising the throughput of those coming out of Universities towards the development of practical vocational skills - and conveying the importance of toughness, determination and flexibility as the three golden qualities that are key to achieving economic success.”

What is FedEE?

The Federation of European Employers (FedEE) is the leading organization for multinational companies operating in Europe. It was founded in 1989 with assistance from the European Commission and has its head office in London, UK.  The Federation is a direct member organization currently chaired by Ford Europe.