[lbo-talk] Question: Source of High European/Relatively Low US Unemployment

[Dennis Redmond]

> OK, my understanding is that for quite some time, say
> 25 years, unemployment in Wesrtern Europe has a
> everaged about 10-11%, while in the US the average has
> been a little more than half that, maybe 6% Is that
> right? Pressed on this topic by a smart, fairly
> open-minded, not economically informed teenager, I
> found myself saying, well, the Official Explanation
> according to the Economists is that labor is
> compatively overpriced in Europe.  However, this isn't
> right because . . . .

...unemployment is complicated. Switzerland and the Netherlands have high
wages, but low unemployment rates; Spain and Poland have lower wages, but
high unemployment rates. Eurostat (http://europa.eu.int/comm/eurostat)
estimates that EU-25 unemployment was 8.8% in January 2005, as compared to
5.2% for the US and 4.8% in Japan.

Unemployment is a bit higher in the EU than the US because (1)
semiperipheral regions like Spain, Portugal, and Eastern Europe with big
agrarian workforces are included in the total count, whereas 2 million US
prisoners are not, (2) the euro has appreciated 40% versus the dollar,
putting a damper on EU exports, and (3) labor participation rates in the
US plunged since 2000, but remained relatively stable in the EU.

-- DRR