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The Problem of the European Unemployment

08.05.2013
Annual Conference of the European Search and Matching Network at Johannes Gutenberg University Mainz

For decades, the problem of increasing and persistent European unemployment has been at the center of attention of European academics, policy makers, and the public alike. This was true in the earlier days, when oil price shocks hit the European economies in the 1970s. This is also true now, in the aftermath of the worldwide financial crisis.

The Annual Conference of the European Search and Matching Network, which takes place on May 15-17, 2013 at Johannes Gutenberg University Mainz (JGU), gathers together leading European and world labor economists to discuss the most up to date problems of the European labor markets and suggest ways for smooth and quick recovery from the crisis.

European unemployment is as diverse as the European countries themselves. How much unemployment one or another country has depends on many equally important factors. These are the strictness of employment protection regulation, generosity of unemployment benefits, situation on the markets for goods and services, financial markets and so on. Looking at the recent recession, differences in these factors have led to very different developments among the European economies. In the countries with mild labor market regulations, like the UK, unemployment has increased predominantly because firms were closing jobs, although job creation for surviving firms has not become much more complicated. In the countries with relatively tight employment protection, like France, there was not much closing of jobs by firms, but it has become increasingly more difficult to create new jobs. In the countries with traditionally strong unemployment support, like Scandinavian countries, the increase in unemployment could rather be caused by prolonged waiting for better times.

All of these countries had relatively stable markets, meaning that shocks such as the financial crisis would have detrimental effects but would not destabilize the entire economy. This general sound policy system has saved them from drastic jumps in unemployment. As a contrast, collapsing markets like the housing market in Spain or sovereign debt crisis in Greece were responsible for extremely high increases in unemployment in these countries. The reason for high increases in unemployment in Greece and Spain is therefore primarily to be sought outside of labor markets or labor market policies per se.

Interestingly, along with these negative developments there are also success stories, such as for instance the performance of Austria, Poland, or Germany. Taking the example of Germany, timely labor market reforms undertaken before the crisis, the Hartz reforms, together with innovative policies like working time accounts, and a quick recovery of exporting industries have led even to a decreasing unemployment rate during the recession.

Clearly, persistent differences in institutional arrangements and situations on goods and financial markets in different European countries do not permit copying a successful policy. Still, a thorough discussion of weak and strong sides of any possible policy enables us to advise on the most appropriate steps. Effective public employment agencies that were introduced as part of the Hartz reforms in Germany or working time accounts might turn out useful for other countries. Given that they helped Germany as a highly regulated country, they might be useful in other highly regulated countries as well. They might be useful for more seriously affected countries as well, but the primary policy objective in these cases should focus on outside the labor market. The forthcoming annual conference in Mainz is dedicated to provide a platform for developing these ideas further.

The European Search and Matching Network is a scientific organization that devotes its research to understanding the ways labor markets work and the challenges labor market policy faces in the modern global economy. It has been founded in late 2010 by a group of well-established leading young academics from France, the Netherlands, Spain, and the UK. As of now the network includes over 150 members of high-ranked universities from all over Europe and North America. Among its members are also two of the Nobel Prize winners in Economics of 2010: Dale Mortensen (Northwestern University; USA) and Christopher Pissarides (London School of Economics; UK), who have received the Nobel Prize for their essential contribution to modeling labor markets.

Further information:
Professor Dr. Andrey Launov
Junior Professor of Econometrics
Gutenberg School of Management and Economics
Johannes Gutenberg University Mainz (JGU)
D 55099 Mainz, GERMANY
phone +49 6131 39-23233
e-mail: andrey.launov@uni-mainz.de
http://www.empirical.economics.uni-mainz.de/115.php

Professor Dr. Klaus Wälde
Chair in Public Policy with a focus on Macroeconomics
Gutenberg School of Management and Economics
Johannes Gutenberg University Mainz (JGU)
D 55099 Mainz, GERMANY
phone +49 6131 39-20143
e-mail: klaus.waelde@uni-mainz.de
http://www.macro.economics.uni-mainz.de/
http://www.waelde.com
Weitere Informationen:
http://www.sam2013.uni-mainz.de/51.php (conference program) ;
http://sam.univ-lemans.fr/ (European Search and Matching Network)

Petra Giegerich | idw
Further information:
http://www.uni-mainz.de/

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