Industry in Crisis: Unemployment: Grim forecast of total climbing to 15 million

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The Independent Online
EUROPEAN unemployment will be more than a million higher than expected next year at 15 million, according to a forecast released yesterday. The issue already tops the political agenda in most European countries, as joblessness and rising levels of immigration form an explosive mixture.

Europe experienced high levels of unemployment throughout the 1980s. Despite strong economic growth, it has been consistently two percentage points higher than the average for the industrialised world. Economists blame structural change, poor labour market policies and high wage levels, but admit they have no single diagnosis and no easy solutions.

Things are about to get worse. The Organisation for Economic Co-operation and Development yesterday cut its estimates of growth in the United States next year by a third. This will retard world economic recovery, pushing up joblessness across Europe.

The OECD now expects its European members to have unemployment of 9.9 per cent this year, up from 9.4 per cent. It will rise to 10.4 per cent next year, compared to a projection of 9.4 per cent in the organisation's Employment Outlook. This would add about 1.3 million to unemployment queues, taking the total to 15 million.

Britain has the fourth highest unemployment rate in the European Community, after Ireland, at 18 per cent, Spain at 16 per cent and Italy at 11 per cent.

Germany has been the exception to the pattern. But unemployment there is climbing. Siemens, Deutsche Aerospace and BASF have announced jobs cuts totalling more than 10,000 this week.

Aside from the problem of cyclical unemployment, to be expected at a time of weak or negative growth in many EC countries, there is a more worrying scourge: long-term unemployment. This constitutes about half of all EC unemployment, according to the OECD, compared to 10 or 20 per cent in the rest of the industrialised world. Mining has been a casualty across Europe: Belgium closed its last mine last week. Other traditional heavy industries like steel are also in decline.

But long-term unemployment increasingly affects both the unskilled trades and white-collar occupations. This coincides with skill shortages in many areas, leading some economists to conclude that education and training systems are the root of the problem.

Traditional policy focuses on income support, but this is adding huge burdens to government budgets. Most governments are now trying new approaches.

France, for instance, has encouraged the use of part-time work and work-sharing. For instance, older construction workers can become part-time teachers to younger staff, working half their previous hours but getting 80 per cent of their salary. Companies hiring part-time workers pay 30 per cent less in social security contributions, helping to make up the balance.

Pierre Beregovoy, the French Prime Minister, told the cabinet earlier this year: 'We will not solve the problem of unemployment over the long term without work-sharing, the reorganisation of work, company by company and branch by branch, the reduction of working time and the development of part-time work.'

The OECD recommends 'a shift away from measures that generate dependency on income transfers to those that mobilise labour supply and foster economic opportunity, improve the efficiency of labour market matching, and develop employment-related skills'.