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Title: What explanations can be given for the sustained rise in unemployment in European Union countries si Post by: Nurşah Akın1 on Jun 4, 2021 What explanations can be given for the sustained rise in unemployment in
European Union countries since 1970 relative to the United States? Does your answer suggest policy initiatives which might alleviate this problem? Title: Re: What explanations can be given for the sustained rise in unemployment in European Union ... Post by: bio_man on Jun 4, 2021 In the 1970s, raw materials prices rose sharply in Europe. In turn, the high rate of productivity growth that had characterized the post-war period came to an end. This led to an increase in the cost of labor, and so to the increase in unemployment. In the 1980s, tight money led to a prolonged period of high real interest rates, and so to a large increase in the user cost of capital. This in turn could have led to low capital accumulation, and by implication, lower employment growth, higher unemployment.
The oil price increases of the 1970s turned into decreases in the 1980s. Underlying productivity growth has remained low. Whereas in the United States, energy reliance on oil and gas from foreign countries has remained relatively low since the United States is energy-rich. Coal is still used today to power cities all across the nation, and vast underground reservoirs of petroleum are extracted in land. Social protection is high in Europe. Many immigrants to European countries rationalize that it's better to stay at home and get paid social service money, than it is to work at a low-paying job. Unemployment insurance is more generous than in the US, both in terms of the replacement rate and of the length for which benefits are given. Employment protection often has a large administrative and judicial component. The tax wedge between labor costs and take-home pay is high, although this reflects in large part the higher proportion of services that are provided by the state rather than by the market in Europe. To circumvent this problem, European countries need to reduce taxes on its citizens, and lighten the degree of social protection. This will entice members of society to be less lazy, and seek employment instead. The most dramatic change in the U.S . labor force in the past two decades has been the unprecedented entry of large numbers of women into the work force and their sustained commitment to the world of work. More than half of all American women of working age are now in the labor force. In Europe, only Scandinavian women exceed this level. In the United States, single and divorced women have long had relatively high labor force participation rates for obvious economic reasons. Their rates are not far behind those of men. However, the most striking feature of greater female participation in the work force is the proportion of married women who work. American wives have entered the work force in significantly increasing numbers, especially since 1970. This wasn't the case for European wives until recently. Sources: > http://economics.mit.edu/files/710 > https://www.bls.gov/opub/mlr/1983/08/art1full.pdf |