Unemployment in the European Nations Italy, Spain, Portugal and Greece - Essay Example

?Unemployment in the European nations of Italy, Spain, Portugal and Greece Unemployment, a major menace to the society has prevailed through the times and the problem has become more chronic and serious at the present moment. In the current situation of unemployment, most of the countries irrespective of the fact whether they are developing or developed are a victim of unemployment. Unemployment might be defined as the number of person searching for job with their full initiative yet not getting one. People averse of working at any existing wage rate, for any reason what so ever, are considered as "economically inactive". Hence these people do not fall amidst the domain of Unemployment. The thing that makes unemployment most dangerous is that it directly affects the growth of a nation. Indefatigably high levels of unemployment have become a common scenario throughout most of the European Union. Although, it contrasts considerably with the comparatively low unemployment levels in neighboring developed nations, especially in those of the United States and Japan. Inspite of the fact that high unemployment rate is rendered as a common problem in European unions, there are significant variations in the unemployment rates of each of its members1. Despite being amongst the developed European countries, unemployment rate in Spain, Italy, Portugal, and Greece is rising at a staggering rate. The Problem of Unemployment Unemployment in Spain The contrasting difference in the unemployment rate of the European nations was essentially recognized in the unemployment rate of Spain. In the year of March 2004, it was evidenced that the unemployment rate in Luxemburg was at a low of 4.0%, while in Spain, it reached a mammoth 11.1%. It is significant that there are other factors idiosyncratic to each of those nations with soaring unemployment rate results to this problem. This phenomenon is essentially true in the case of Spain, as persistently high level of unemployment has been recorded there. The scenario in Spain was once so dismal that unemployment rate recorded was twice the average of the European nation’s unemployment rate. High unemployment rate is currently a problem that is encountered by all almost all the major nations of the European Union. The condition is so dismal, that it is the high level of unemployment that essentially distinguishes the economies of the European member countries with that of the United States. The situation is problematic as, underutilization of resources takes place due to the low level of unemployment. This simultaneously results in decline of the total production of goods that could have been achieved in a stable employment situation. This instigates the citizen of Spain to migrate into other countries if they are unable to obtain proper employment conditions in their native country. It is a general phenomenon that people want to allocate to work places where they get higher wages for their work. Acknowledging the reason of unemployment from a neo classical perspective, several key elements can be identified. The primary among them is the actual factors related to job search. The job market is never stable, as the frequency of workers changing jobs is essentially high. Although the problem takes a larger shape when this changes in job takes a long time due to heterogeneity of the work force and job openings. This implies that there is no significant balance between the labor supply and the labor absorption in the market. This condition is due to the lack of job openings, lack of proper information about employment, and the cost of retraining that many workers are unable to cope up with. Another factor that contributes to low employment is rigidity in the wages of workers, due to labor legislation and significant influence of labor unions. The wage rigidity’s effect is essentially noted when the prices of goods fall due to the decrease in demand for products, which simultaneously decreases the marginal productivity of workers. In this scenario, due to rigidness of labor supply in the short run, and no significant changes in wages of the workers, unemployment occurs as a result2. Unemployment in Italy Italy projected one of the worst labor market performances amongst the countries of the European nations. After the potential decline that took place in the first quarter of 1960, the unemployment rate has fluctuated significantly since then. Unemployment increased at a staggering rate of 12% during the period of 1992 to 1995, and since then the rate has been increasing at a stubborn rate. The most prominent feature of the Italian labor market is the large unemployment differential across regions, particularly among females and new workers in the market. The upward drift in the unemployment rate, and further evolution of its composition, hint at the presence of structural elements that have favored the rise and persistence of lab our market imbalances. This imbalance is a result of the interaction between the negative shocks that have hit the Italian economy over the years, and the structural elements hindering the adjustment process. Italy stands out as a pragmatic case of labor market rigidity3. The relationship between unemployment and labor market has been a subject for different controversies. Local unemployment may be a result of asymmetric shocks affecting the demand or supply of labor, and from wages failing to adjust the market clearing level. Unemployment in Portugal Unemployment rate in Portugal is also at a dismal state like the other European nations like Spain, Italy, and Greece. Unemployment duration in Portugal is almost three times of that of the United States of America. The unemployment condition in Portugal is like a stagnant pool, with low flows in and out, and long period of unemployment. Empirical research on job allocation focuses on job flows, which implies changes in employment at the establishment level over time4. In the year of 2011, the unemployment rate in Portugal rose in the first quarter due to the emergence of recession. The government attempts to cut spending and narrow the budget deficit further damaged the situation. The rate of jobless person rose from 11.1 percent to 12.4 percent in the fourth quarter of 2011, as specified by the Lisbon based national statistics institute. The finance minister of Portugal, Fernando Teixeira acknowledges that, the economy will descend 2% during 2011, twice as much as he had forecasted in the earlier years. The government is implementing measures to qualify for an international aid package of 78 billion Euros from the European Union and the international monetary fund. The finance minister also mentioned the gross domestic product will also decline two percent in 20125. Unemployment in Greece The unemployment condition in Greece also showed signs of degradation in spite of being amongst the developed European nations. A sharp fall in industrial production towards the end of the year of 2011 marked the further degradation in the unemployment condition in Greece. The unemployment rate soared up to 20.9% during the month of November, 2011, compared to a month earlier. The total number of unemployed persons reached up to 1.029 million as stated by the Hellenic statistical authority. As the demand for Greek goods declined in the last quarter of 2011, it essentially effected the unemployment situation. The civil political turmoil during the month of October and November also damaged the situation. As economist’s acclaims, the continuous degradation of the economic condition in Greece significantly affected the unemployment rate. At present, Greece is now entering the fifth year of recession; this has also resulted in raising the rate of unemployment in Greece. The rising business bankruptcies had made the situation even worse. There is a notable deterioration in the Greece unemployment rate compared with the year of 2010. In the month of November 2010, the unemployment rate in Greece were 13.9% and the number of jobless being 692,577. The Greek government in its budget of 2012 predicts that unemployment rate will increase at a staggering rate of 17.1 %. But ‘Greece's private-sector umbrella union’ has predicted that one million Greeks would lose their jobs by the end of 2011. This would make a 20% unemployment rate, and foresees that increasing further this year6. Comparison in Unemployment Rate between Italy, Spain, Portugal, and Greece The problem of unemployment has been a common menace for the developed European countries. In spite of the rising unemployment rate of the European nations, there are significant differences among them the variation in the unemployment rate among its member nations. The unemployment rate variations amongst Italy, Portugal, Spain, and Greece are very much notable in the following charts. The first chart discusses the quarterly unemployment variations in the European countries. The data is retrieved from the United States department of labor, bureau of labor statistics. The employment rates obtained are seasonally adjusted. QUATERLY UNEMPLOYMENT VARIATION (2007)7 It is evident from the above graph that unemployment rate in all the nations are increasing at staggering rate from the year 2007-2009. The unemployment rate in Italy was subsequently low as compared to the other three European nations. Portugal portrays the highest rate of unemployment, and is closely followed by neighbors, Greece and Spain. VARIATION IN QUATERLY UNEMPLOYMENT IN THE YEAR 2011 8 The above graph is formed using the quarterly data for unemployment rates retrieved from United States department of labor, bureau of labor statistics. The unemployment rates obtained are seasonally adjusted. It is essentially noted that the unemployment rates have increased significantly as compared to the 2007 quarterly rates. This signifies that there is essential deterioration in the unemployment situation in the concerned European countries. Here also it is notable that Italy’s unemployment rate is significantly low than the other three European nations. In the year of 2011, Spain portrays the maximum rate of unemployment during all the four quarters of the year. EMPLOYMENT RATE DURING THE PERIOD OF 2007-20119 The above data portrays the variations in the unemployment rate of the European nations of Spain, Italy, Greece, and Portugal. It is evident that the unemployment rate of Spain is increasingly in a much higher rate as compared to the other three European nations. Italy’s unemployment rate although increasing, portrays a moderate rate. Conclusion The unemployment condition in European countries like Spain, Italy, Portugal, and Greece is dismal. It results in insisting people to relocate in other countries other countries where there is a better probability of getting a job and the wages paid are significantly higher. This can potentially be disastrous for the future growth of a nation; most of the potential talents of a country are duly attracted towards working in other countries, rather than in his or her native land. This implies that if the problem of unemployment continues to persist in Europe, then it could well become the decisive factor in the economic development and political power of the European nations of Spain, Italy, Greece, and Portugal. The persistence of chronic unemployment not only affects the economic status of a nation but also leads to various personal problems in the household of the unemployed. Long term unemployment has not only resulted in financial hardship, poverty, increase of criminal activities and homelessness, but also several other key problems that are often overlooked. These problems include family tensions and breakdown, Isolation by the society, loss of confidence and self esteem, and feelings of shame and stigma. All these factors can lead to the decline of a healthy society of nations. 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Lima, Joao, Portugal’s unemployment rate increases as economy shrinks, 2011, Business Week, April 15, 2012 from: http://www.businessweek.com/news/2011-05-18/portugal-s-unemployment-rate-increases-as-economy-shrinks.html Portugal, Pedro and Olivier Blanchard, What hides behind an unemployment rate: comparing Portuguese and U.S labor markets, 2000, April 15, 2012 from: http://test.aeaweb.org/aer/archive/9101/91010187.pdf Read More