1. How well is the EU doing in jobs terms?
Sadly, the European Union remains the area with far the highest level of registered unemployment in the developed world. The latest figures produced by Eurostat show an average of 8.8% out of work, varying from 2.6% in the Netherlands and 9.0% in Germany to 15.0% in Spain. As the total labour force in the EU is close to 170m, this means that upwards of 15m people are registered unemployed. Significantly, however, registered unemployment is much higher on average among the countries in the euro zone than for those not included in it. The average among the Single Currency economies is 9.6%, whereas for those outside the euro, including, of course, Britain, it is 6.3%
2. Is there a story behind the unemployment figures?
Unfortunately, there is. The published figures for registered unemployment in the European Union hugely understate the true state of affairs, because they only include those actively looking for work. They leave out all those who for a variety of reasons would like to work, given a fair opportunity to do so at a reasonable wage or salary, but who have dropped out of the labour force. These include vast numbers of people who have been retired early, who are caught in benefit traps, who are registered as disabled, or who have become so demotivated by long periods out of work that they have given up hope. The Netherlands may have a low registered level of unemployment, at 2.6%, but 15% of the entire Dutch labour force is registered as disabled at a time when health provision has never been better. This may be an extreme example, but it helps to explain why, overall, the total number of people involuntarily out of work in the EU is about twice the official figure - roughly 30m in total - a staggering waste of talent and ability.
3. Why has the EU jobs record been so poor?
There is a simple reason why the EU has had such huge problems in generating enough jobs to keep all the working population employed ever since the 1970s. The explanation lies in all the efforts which have been made over the last quarter of a century to lock the currencies of EU Member States together. First, in the 1970s with the Snake, then in the 1980s and 1990s through the Exchange Rate Mechanism, and more recently with the preparations for the Single Currency since the 1991 Maastricht Treaty - inflation across the EU had to be driven down to match German levels to make this policy work. This has meant twenty five years of high interest rates, tight money, deflationary policies, low growth and rising unemployment. During the 1950s and 1960s the average rate of growth in the countries now making up the EU was about 5% per annum, and unemployment barely existed. Since the mid 1970s the cumulative average growth rate has been barely 2%. As a result not nearly enough new jobs have been created, leading to the present huge unemployment problems.
4. What has so much unemployment done to the balance of power in the work place?
The result of the very large increase in joblessness in the EU has not just been to create large numbers of people out of work. It has also caused a massive switch in power away from working people towards employers. Hardly surprisingly, the bargaining position of trades unions has been greatly weakened by high levels of unemployment, and across the EU they have lost ground both industrially, and often as the result of legislation too. Partly as a direct consequence, there has been a relentless widening in income differentials between those at the top and those at the bottom of the income earning brackets. The rich have become much richer while generally blue collar workers have seen their standards of living rise only in line with the slow growth in national incomes. The biggest losers have been those no longer in work, whose living standards have fallen heavily, compared to those still in work.
5. What can be done about unemployment in the EU?
The only solution to the European Union's problem of high unemployment is to make the EU economies grow more quickly. There is some sign of quickening growth at the moment, but it is doubtful whether it is going to be enough. As a result of competitive pressures, training, intensive management efforts and the computer revolution, productivity among the employed labour force is rising at about 2% per annum on average, while at the same time the working population in the EU is still increasing at about 0.7% per annum. A simple calculation then shows that, just to stop unemployment rising, average growth rates of about 2.7% are required, and considerably more than this to get unemployment down to anything like the levels common in the 1950s and 1960s. There is little sign that growth rates of anything like this size are in prospect.
6. Are Third Way policies the answer?
It is suggested in some quarters that the way to solve the EU's unemployment problems is further deregulation, increased competition, and more job insecurity, to drive down costs and thus to make EU output more competitive in world markets. This is one way of making any economy perform better in world markets, but it has huge downsides. The social cost is very high in relation to the increased competitiveness likely to be achieved, as all countries which have tried this policy have found out. If the root problem is that the cost base in at least some EU economies is too high, by far the most effective solution to the problem is a lower exchange rate. Unfortunately, however, the advent of the Single Currency has ruled out this way of adjusting differentials in competitiveness within the euro zone. The result is likely to be a resort to much harsher and less effective ways of solving differential competitiveness problems within the EU.
7. What about the Single Marke
Faced with the kind of problems currently being experienced in Britain in the car industry and in textile industries, British governments have traditionally been able to use state aid to provide such ailing industries with a breathing space until they could restructure and get themselves able to compete again. Nowadays, this cannot be done without the approval of Brussels, whose consent is often not forthcoming or fatally delayed - as in the Rover case. No doubt much of the support for the Single Market comes from people opposed on principle to state aid to ailing industries, and in an ideal world there may be an argument for moving resources from parts of the economy which are not doing well to those where they might be better used. It is a different matter altogether, however, when British manufacturing, very largely as a result of the high value of the pound in relation to the weak euro, has a cost base which puts any industry making internationally standardised goods at a massive disadvantage, especially when competing with euro zone production. In these circumstances, to run the risk that Britain - the fourth or fifth biggest economy in the world - will be left with no mass car manufacturing capacity bears few of the hallmarks of economic rationality.
8. Are British jobs dependant on our membership of the European Union?
Recently, there have been allegations by some of the more ardent pro-EU organisations in Britain that up to 3m British jobs depend on exports to other EU Member States, and that if we do not fall in line with EU requirements all this employment might be at risk. Two reports produced over the last few weeks, one by the National Institute of Social and Economic Research and the other by the Institute of Directors, however, each show what scaremongering nonsense this is. Both reports demonstrate clearly that few, if any, British jobs would be lost if we were no longer EU members. The external tariff to the EU is now, on average, less than 4% as a result of successive tariff reduction rounds, so that even if the tariff were re-imposed, it would not be a very high barrier. It is extremely unlikely that the tariff would be re-established, however, not least because other EU countries sell far more to us than we do to them, so that they would suffer much more than we would if import duties were re-imposed. On the plus side, if we were no longer EU Members, we would cease to pay in to the EU budget billions of pounds every year more than we receive back. We could also get shot of the Common Agricultural and Fisheries Policies, saving every household in the country some £1,000 per year. There is no reason, therefore, to believe that job prospects in Britain over the coming years are dependent to any significant extent on either our being at the "heart of Europe" - or indeed members of the EU at all.
9. What of the futur
One of the most important keys to a stable and civilised society is an adequate supply of good quality jobs for everyone able and willing to work. The danger is that we are moving to a world of secure, well paid jobs for those - perhaps 40% of the total - who are well off; insecure, badly paid jobs for perhaps another 40% of the potential labour force; and increasing poverty, associated with marginalisation and lack of work, for the remaining 20%. This is a desperately depressing prospect. How can it be avoided? The only solution is for the EU economies to improve their performance radically, and to raise their growth rates and employment levels to somewhere near where they were in the 1950s and 1960s. To achieve this there will have to be a major shift in priorities towards expansionist policies, lower interest rates, more flexible exchange rates, and the ability to adjust policies to deal with whatever circumstances arise. The danger is that the EU is moving in exactly the opposite direction, with more and more rigid rules, fixed exchange rates, one size fits all policies, underpinned by the kind of monetary respectability which regards low rates of inflation as more important than any other economic objective. This is not what Labour ought to stand for. We can - and we ought to - do much better than this.
________________________________________________________________
Published by the Labour Euro-Safeguards Campaign
72 Albert Street, London, NW1 7NR
E-mail: lesc@johnmillsltd.co.uk * Website: http://www.lesc.org.uk