Letter: Political barriers to reducing unemployment in Europe

Sir: Your view, as expressed in Tuesday's leading article, that 'Europe must face reality', is unarguable. I fear, however, that reality will prove to be even tougher than you imagine. The cause of long-term structural unemployment is well known: it is too little inequality in wage costs between the skilled and the unskilled. The reason that this is not more generally acknowledged is not that economists disagree; it is that the view has been politically unacceptable. While it is sad that unemployment has had to rise so high before the issue can even be discussed, let alone really faced, it is encouraging that a beginning is being made.

As Hamish McRae points out (Business & City, 22 June), Western Europe leads the world in the provision of social benefits and in unemployment. A recent study by Citibank has shown that the two are linked: the greater a government's share of national income, the higher the level of unemployment.

Sadly, the practical barriers to solving the problem are so great that it is likely to be many years before helpful measures are introduced. The main barrier is that the vast majority of the current generation of politicians have spent their working lives talking nonsense on this subject, and their vanity and lack of imagination will ensure that they are an obstinate obstruction to progress.

A problem that could be readily solved is that of inequity. All that is needed is some form of negative income tax, so that a growing inequality of wage costs does not transfer to a growing inequality of income, which has been the US route to job creation. Our present structure of politics in Europe makes a shift to negative income tax unlikely for many years, however. The right wing is uninterested in equity and the left wing uninterested in ideas. May I recommend it, therefore, as a suitable cause for the Independent.

Yours faithfully,

ANDREW SMITHERS

London, E1

23 June