European labor markets: Characteristics and operation (including the role of trade unions and long term unemployment); impact of European integration and migration

Résumé du document

The labor market is truly a special market because labor is not like any goods. Labor market involves particular regulations and arrangements because what is sold is people's time and skills. Besides the economic goal of performance there is also a social requirement to fulfill. This is why labor market is often a priority in politics. With regard to the European Union despite the right to move freely in Europe there is no "European Labor market" there are national labor markets with different regulations depending on the customs of each Member State.

However, as the European integration becomes closer, it is not to exclude that the EU may become a single integrated labor market one day. Because the European integration would be a unique experience thus it will be interesting to look at the impact of such integration in labor markets. In consequence, we will look first at the particular characteristics of labor markets in Europe, and why are they not doing very well, then we will move on to the impact of European integration as a potential way of improving European labor markets.

What are the characteristics of the European labor markets? Unfortunately, one of the main characteristics is their high rates of unemployment. Because the performance of labor markets is defined by the ability to reach full employment, European labor markets in general are not doing well. The unemployment population of potential workers are between 15 and 64 years old. In 2012 only 64.2% had a job (see appendix 1 for more details). It is much lower than in the United States, even if in these past few years the gap has been reducing.

Extraits

[...] This list is truly not exhaustive but seems to reveal that there are some misconceptions within public opinion about the real impact of European migration. To resume, European labor markets have faced difficulties to curb high unemployment caused by the important rigidities created by social protection traditions. The problem of Europe in this regard lies in the need to find an equilibrium that allows reaching two important conflicting goals: social protection and economic efficiency. The European integration may lead European Union member states to tackle this problem seriously by accentuating this situation. [...]

[...] Labor migration though is one of the most polemical aspects of European integration because there are strong fears in countries with relatively high wages about the competition with foreign workers, outsourcing and unemployment. A good example are the special provisions temporally imposed on new members of the EU in 2004 and 2007 in order to limit migrations from these countries that one expected massive. Another is the tendency to hold immigrants responsible for unemployment and abuse of social benefits. During the French general elections in 1978 already the extreme-right party Le Front National chose the catch phrase million unemployed million immigrants”. [...]

[...] Unfortunately, one of the main ones is their high rates of unemployment. Because the performance of labor markets is defined by the ability to reach full employment, European labor markets in general are not doing well. Indeed, the unemployment-to-population which is the percentage of potential workers (everybody between 15 and 64 years old) who actually has a job was of in 2010 (see appendix 1 for more details). It is historically much lower than in the United States, even if these past few years the gap has been narrowing[2]. [...]

[...] Labor markets, just as other markets, are run by the rule of demand and supply. Demand and supply in theory meet at a point of equilibrium, where both firms and workers are satisfied. In reality, the market is not totally flexible and thus the price of equilibrium or in this case the wage - is not the real one. The need for special regulations of labor markets in order to protect workers is at the source of rigidities that prevent from reaching the equilibrium and thus harm the economic efficiency of the market, creating involuntary unemployment. [...]

[...] Unemployment rates in Europe, seasonally adjusted, November 2011 Source : Eurostat. Table unemployment rates in Europe 2000-2010 As measured bu the EU's Labour Force Survey (EU LFS) via Eurostat, statistics by the European Commission [online]. Available at : http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Employment_s tatistics and http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment _statistics For more details see Grisse C., Klitgaard T. and Sahin A., The Vanishing US-EU Employment Gap Federal Reserve Bank of New-York [online], July Available at : http://libertystreeteconomics.newyorkfed.org/2011/07/the-vanishing-us-eu- employment-gap.html Helfgott R.B., p.83. Baldwin R., and Wyplosz C., p.244. [...]