Posts Tagged ‘Europe’
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Tags: chart, Europe, Greece, Spain, unemployment, youth
According to Eurostat [pdf], the euro area unemployment rate was a stubbornly high 12.1 percent in November 2013, unchanged since April. What this means is that 19.24 million workers in the euro area were without jobs, an increase of almost half a million since November 2012.
The countries with the highest unemployment rates were Greece (27.4 percent) and Spain (26.7 percent). Those countries also had the highest youth unemployment: an astounding 54.8 percent in Greece (September) and 57.7 percent in Spain (November).
Tags: economics, Europe, history, history of economic thought, macroeconomics, mainstream, unemployment, United States, youth
They never give up. But no matter how much lipstick they put on a pig, it’s still a pig.
Ross Douthat did it back in February, by painting a rosy picture of the drop in the employment-population ratio.
Now, we have Zachary Karabell expressing his optimism about the youth unemployment crisis (16 percent in the United States, more than 50 percent in countries like Spain and Greece). Based on a single anecdote, he concludes that young people, at least college graduates, are not really unemployed. They’re just choosing to look for better options.
many college-educated young people are choosing not to take low-paying service-level jobs if they don’t absolutely have to. Because they can live with their parents (and as many as 45 percent of recent grads do) and because they rarely have much in the way of fixed costs such as homes and children, they can hold out for a job that matches their ambitions. They can also retool their skills as they discover that their college degree in marketing and communications may not leave them in the best position to get the type of job that they want.
This type of unemployment is one of choice — rational, legitimate choice — not of systemic failure. It is a challenge to find a meaningful job, but that hasn’t stopped people from trying. A youth cohort determined to create meaningful work should not be seen as lazy, lost or in dire straits. Instead it could be exactly the type who might actually lead the transition of our economy away from the making-stuff economy of the 20th century to an ideas economy of the 21st. . .
In the United States, youth unemployment is not quite what it seems. It is not a simple sign of how bad the economy is. Youth unemployment is actually a sign of ambition and expectation. Young people aren’t part of a generation of despair, but rather a generation determined not to settle. That may not always be realistic, but it is a vital fuel to propel our society forward.
If it looks like a pig, smells like a pig, no matter how much lipstick you put on it, it’s still a pig.
And, while we’re on the topic (of porcine cosmetics, not unemployment), there’s Simon Wren-Lewis, who so desperately wants to tell us, notwithstanding the spectacular failures of mainstream economics in recent years, that all is well. Everything we need is right there in the textbooks, he argues. Like the “the proposition that austerity was a crazy thing to try in this recession.” Well, on that one point he’s right: all you need is some basic Keynesian economics to criticize austerity. But, no matter how hard you look, you’re not to going to find the appropriate tools for analyzing a whole host of other crisis-related issues, such as the role of inequality in creating the conditions for crisis or the tendencies within capitalism to endogenously produce such crises. Sure, the ideas are there to push back against the austerians but, nowhere in mainstream macroeconomics—whether in the textbooks or in the most advanced areas of research—are you going to find a theory of capitalist dynamics that explains how we got into the current mess, much less how to get out of it. Wren-Lewis wants to blame partisan concerns (and, sure, there’s plenty of that) but not the basic theory.
To give credit where credit is due, Wren-Lewis sincerely wants to do the right thing and take the ideological lipstick off the pig. But then, even after adding a bit of economic history and the history of economic thought, he’s still left with the same old pig.
Tags: chart, Europe, Greece, Spain, unemployment, United States, youth
“We hope 2014 will be a year of recovery,” said Stefano Scarpetta, the director of employment, labor and social affairs at the Organization for Economic Cooperation and Development. “But we are still looking at a very large number of youth who will have endured a long period of extreme difficulty. This will have a long-lasting effect on an entire generation.”
Tags: Europe, Jean-Paul Sartre, Keynes, macroeconomics, neoclassical, profits, United States, wages
We’ve known for a long time (as I’ve written about before, e.g., here, here, and here) that neoclassical economists blame workers and their downwardly rigid wages for creating and maintaining high levels of unemployment. If the labor market is flexible, a fall in the price of labor is presumed to eliminate involuntary unemployment. If it’s not, then other means are necessary, such as austerity policies that raise unemployment, thus creating pressure to decrease nominal (and, with them, real) wages with the promise of eventually restoring full employment.
Keynesian economists, for their part, reject many features of the neoclassical model, including the effectiveness of austerity policies. Their argument is that, in general, nominal wages are downwardly rigid—and, even if they weren’t, forcing wages down might lead to deflation, and therefore move us further away from macroeconomic recovery. Their preference, instead, is for a combination of external devaluation (when possible, such as in the United States) and internal inflation (when currency devaluation is not possible, such as in the euro zone), which have the effect of lowering real wages even when nominal wages are constant.
That’s exactly what Paul Krugman has been advocating all along, such as in this recent post:
There are two reasons moderate inflation is actually a good thing for modern economies — one involving demand, one involving supply.
On the demand side, inflation reduces the problem of the zero lower bound: nominal interest rates can’t go negative, but real rates can to the extent that modest inflation is embedded in expectations.
On the supply side, inflation reduces the problem of downward nominal wage rigidity: people are very reluctant to demand or accept actual wage cuts, which becomes a serious constraint if the relative wages of large groups of workers “need” to fall.
Keynesian economists are now soft-peddling inflation for precisely that reason: workers’ wages “need to fall” but employers are reluctant to demand and workers are reluctant to accept nominal wage cuts. But, if inflation rises and workers aren’t able to keep up by demanding higher wages, their real wages will fall.
As it turns out, both wings of mainstream macroeconomics—neoclassical and Keynesian—accept the idea that full employment can only be restored by forcing down real wages. They only differ about how that effect can and will be achieved.
The alternative, of course, is to focus not on wages but on profit margins. But corporate and financial profits, it seems, remain sacrosanct. So, under current economic arrangements, workers are the ones who are forced to pay the costs of recovery. By any means necessary.
*The reference is not to Malcolm X but, instead, to Jean-Paul Sartre, in his 1963 play Dirty Hands (act 5, scene 3): “I was not the one to invent lies: they were created in a society divided by class and each of us inherited lies when we were born. It is not by refusing to lie that we will abolish lies: it is by eradicating class by any means necessary.”