Reducing Unemployment in Europe - Essay Example

The Non-Accelerating Inflation Rate of Unemployment promoted a rise in wages, as well as empowerment of labor unions, resulting in the enactment of the policy on minimum wages and policies of the labor market to empower employees, discouraging the employers from flexible working practices that could boost employment. It also affected the rates of tax, thereby making it difficult for employers to absorb more employees in from the labor market (Brodsky 1994 p. 68)

The policy on minimum wages does not help employers in hiring more workers, especially unskilled entry-level graduates. It is believed that the rate of unemployment in Europe has steadily increased from 1970 to a high of more than 8% of the labor force in 2002. From 1990 and 1993, unemployment increased by 2.3%. This is an indicator of the failure of labor market policies to enhance employment creation. It is mainly attributed to their rigidity. In order to solve this problem, “the OECD recommended an improvement in labor market flexibilities” (Brodsky 1994 p. 60) which include; non-wage labor cost reductions, enhancement of income redistribution through re-assessment of the role of statutory minimum wages, job security provisions reforms and reforms in the benefits related to unemployment. These were the major policy drivers in Europe employed to reduce unemployment.

            Research indicates that the benefits associated with unemployment are highest in the European Union. Moreover, they are known to be prolonged and easily accessible to the population of the unemployed in the labor market. This is one factor that is seen to maintain the high unemployment rates. This provides evidence of a lack of enough labor market flexibility that could enhance employment. It is what Nickell (1998) describes as “generous replacement rates” which have maintained the high unemployment patterns in European Countries. Even though there have been several drawbacks in the efforts to reduce unemployment, the active labor market policies have served as a major tool for the government to increase the capability and motivation towards taking up the available jobs, including part-time jobs. On the other hand, they are used to enhance the willingness of employers to retain workers. To some extent, they have enabled the government to get closer to its employment targets.

Flexicurity was a policy approach that was intended to improve labor market flexibility. This has helped in maintaining job security especially for the marginalized groups in the labor market such as women. Flexicurity provides equilibrium between flexibility in the labor market as well as in social security. This has created a rise in employment of women by 3.7 % from 1997 to 2006 (Špidla 2007 p. 13). Initially, women were faced with difficulties in making a decision to either pursue their careers or care for their children. The European Union is has been expanding the creation of employment opportunities since the time that member states began putting flexibility policies into practice. Beginning from 2000, the European Union has been rapidly progressing towards its set employment target of 70%.  The employment target for female workers has been set at 60% while that of the aged workers remains at 50% (Špidla 2007 p.11).

The different policy approaches have enabled the older workers to maintain good health as well as lifelong learning. Pressures on such workers have been reduced through flexible working hours. Many member states have been promoting the policy of active aging which has encouraged the retention of older workers in the labor market. Špidla (2007 p.13) further asserts that through the flexibility policies, the European Union was able to reach an overall employment rate of 64.3% with 57.1% being women and 43.5% aged workers in 2006. Although unemployment has not yet been eliminated completely, to some extent, policies aimed at enhancing flexibility have been successful in reducing unemployment in Europe since the early 1990s.