Unemployment in Europe: Its Impact in the Future of Europe
Unemployment is currently one of the biggest challenges facing the European Union. The fight against
unemployment is an essential question that the European Union has to encounter in the short term. Todayís
unemployment problem represents the most significant worry of the European Union citizen. Unemployment is the
greatest disturbance of the European economy. Approximately 18 million of its people are out of work, an average
unemployment rate of 10.6%. For instance, in France and Spain, the latest rates are 12.6% and 19.9% respectively.
More women are unemployed than men. Youth unemployment is twice as high as the average. Almost 6 million
people have been out of work for more than two years.
Employment initiatives of the EU
Because of the need to pursue solutions to the unemployment alarm, the European Commission called for a special
employment summit of heads of state in late November. The European Commission wants to adopt lots of targets
for the next five years. Under the form of "employment guidelines," it wants to increase the employment rate from
60% to 65%; create 12 million new jobs; cut the unemployment rate to 7%; raise the proportion of the unemployed
who are offered training from the current EU average of 10% towards the average of the three best-performing
member states -that is, above 25%; and reduce the number of people who drop out of the education system by half
within a period of five years. The commission wants to switch some of the $221 billion spent every year on
unemployment benefits to active labor-market policies;
cutting the overhead and tax costs of employing workers; and encouraging more adaptable forms of contract.
Furthermore, the Commission is calling for a reversal of the long term trend towards higher taxes and charges on
labor, which have increased from 35% in 1985 to more than 42% in 1995. The commission considers the possibility
of increasing the growth of part-time work, which has been responsible for all of Europeís net job gains in the past
six years and now accounts for 16% of the European Unionís total employment. At the same time, the commission
wants part-timer employees to enjoy the same security and benefits as full-time workers, a sure formula that has
reduced the number of part-time jobs created. Regarding taxation, the commission recommends reducing taxes on
labor, which have risen from an effective rate of 35% in 1981 to 42% today. Yet rather than just cutting the total tax
burden, which Europe badly needs, it suggests offsetting such reductions with higher taxes on energy and capital
that could well raise unemployment.
Germanyís unemployment trend compared to other EU members
In 1989, the then West Germanyís rate of unemployment was only 5.6 per cent. This was fractionally above the 5.2
per cent of the US. It was well below the European Unionís average of 8.7 per cent, the UKís 7.2 per cent, the
French 9.4 per cent, Italyís 10.9 per cent and Spainís 16.9 per cent. In 1996, Germanyís unemployment rate was 9
percent. This was still below Italyís 12 per cent, Franceís 12.4 per cent and Spainís
22.2 per cent. But it contrasts unfavorably with the 5.4 per cent of the US and even with the 8.2 per cent of the UK.
The German unemployment rate is recently at 11.2 per cent of the labor force. Western Germany jobless rate is
9.5% while in eastern Germany the rate is 18.2 per cent.
Because of the difficulties of German unification, Germanyís job performance seems to be appropriate. However a
justification, although probable, does not change the truth that the country needs more jobs, but has failed to provide
them. Following unification what Germany needed was a surge in labor-absorbing growth. Rather, what has
happened, has been a decline in employment in both eastern and western Germany. Blame for the eastern failure lies
with the decision to translate western labor practices into east Germany. For instance, pressure for wage equalization
has pushed compensation per employee to some 70 per cent of western levels. Given low productivity, unit labor
costs are 30 per cent higher in eastern manufacturing than in the west, making the east the most expensive location
in the world.
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