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EU unemployment is a persistent problem

Anna Sonny, 17 July 2015

One of the characteristic themes of the Eurozone crisis has been the astronomical unemployment rates in the EU. While the financial crisis brought this issue to the fore, a new Civitas report by Michael Burrage shows that high unemployment levels existed in the EU well before the crisis hit, and that the implementation of the Single Market actually saw an increase in unemployment levels across the EU.

Burrage compares unemployment rates in the original 12 EU Single Market members, including the UK, France, Germany and Italy, to ten other independent countries with similar labour market institutions, including the USA and Canada. Looking at 21 years of unemployment rates inside and outside EU over the years 1993-2003, the paper finds that unemployment in these EU member states is consistently higher than the independent countries over the same period – at times, almost double. Even more surprising is that, when compared with three independent European countries (Switzerland, Norway and Iceland) the gap in unemployment rates when compared with the 12 EU member states is even larger. Burrage writes: ‘In 18 of these 21 years, EU unemployment has been more than double than of these 3 countries.’

Figures from the OECD unemployment database show that in 1973, the average unemployment rate of these 12 EU countries was roughly 2.7%, and stood at 2.5% for the ten independent countries. By the time the Single Market had been introduced in 1993, unemployment rates were over 10.25% and 6.16% respectively. High rates of joblessness cannot be explained away by the financial crisis of 2008, nor can they be described as an endemic European problem.

The European Single Market introduced free movement of services, goods, capital and labour across the EU; it was intended to reduce barriers to trade, to boost the European economy and to create jobs. But the figures show that on unemployment, the Single Market has not achieved its aims.

The report offers a general picture of unemployment in the EU, which includes large cross-country differences; there are many national factors that explain high rates of unemployment, including government spending, labour market flexibility and external shocks. Data always needs to be looked at within the temporal context – for example, the 1970s saw the end of the high rate of productivity growth that had characterized the post-war period. But the report certainly uncovers a prevalent pattern that cannot be ignored. This raises serious doubts as to whether the Single Market has had a positive effect on employment in the EU.

1 comment on “EU unemployment is a persistent problem”

  1. Simple explanations:

    1. The tremendous regulatory burden of the EU.

    2. The distortion of EU economies through the transfer of taxpayers’ money within the EU through things such as the structural fund especially to the poorer countries.

    3. The free movement of labour which has undercut wages in the richer EU states and made living on unemployment benefits and the heavy subsidy of employers through in-work benefits such as tax credits attractive alternatives. The free movement of huge numbers of people from the poorer EU states to the richer states will also have impeded economic development in the poorer states.


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