UNEMPLOYMENT is high in the United
States, but it's higher still in Western Europe. That's going to be important for Americans to keep in mind through this contentious summer's politics. The unemployment rate in this country is 9.5 percent of the labor force. In Britain, it is 12.2 percent, and more than half of those people have been out of work for more than six months. The rate is now well over 10 percent in Belgium, the Netherlands, Spain, Italy and Ireland.
In West Germany, in the years before the oil crisis of 1973, the unemployment rate was generally less than 1 percent. It is still the lowest of any major European country, but now it is over 7 percent and rising fast. Much of Western Europe is experiencing a surge of young people into the labor markets, and a rapid rise in the numbers of women who want to work--the same trends that appeared here in the late 1960s. But the creation of new jobs is much slower there. In the 1970s, the American labor force grew by 24 million people, and a rapidly expanding American economy generated jobs for six out of every seven of them. In Europe, the labor force grew by about 4 million in the same decade, but employment rose by only 1 million. Why?
Several interesting answers, or at least suggestions, come from the Organization for Economic Cooperation and Development in Paris, the economic scorekeeper for the industrial world. World War II and its aftermath have left Europeans with an even greater hunger for personal security than Americans. Social benefits tend to be financed more heavily through payroll taxes in Europe than here, and those benefits are more closely tied to jobs. That makes employers reluctant to hire additional labor when the economy is on the upswing, and it makes employees more reluctant to move away into other kinds of work when the economy is on the downswing.
European legislation and labor agreements provide strong protection to personal income. But in a time of high inflation and low growth, as the OECD also points out, it means that wages rise at the expense of business profits and investment--which is bad for employment. Then, as public deficits rise, governments in Europe--exactly like the government here--try to protect personal benefits by cutting back on public investment.
Governments on both sides of the Atlantic assumed, in the 1960s and early 1970s, that the high prosperity of the time was going to last forever. There was a great inclination to believe that the basic questions of economic growth had been solved, once and for all. Both governments and private employers extended extremely broad commitments to wages, benefits and job security, based on those forecasts of steady expansion. Then, after 1973, the forecasts collapsed.
Unemployment in Western Europe averaged 14.5 million people last year, compared with 8.3 million in the United States. The OECD estimates that it will be 16.5 million in Europe this year, and, even with a modest recovery, it will still rise by perhaps a million next year. In Europe's politics, the fact of economic stagnation and rising unemployment now underlies almost everything else.