I thought an article on the Real World Economic review blog by Merijn Knibbe fascinating, He began saying:
Unemployment in Norway is 3%. Unemployment in Spain is 20%. This difference is remarkable, even exotic. Why did the Norwegian labor market do so much better than the Spanish one?
His answer (in a nutshell):
The answer is: flexibility. But in this case ‘another kind of flexibility'. Generally, economists tend to equate ‘flexible labor markets' with USA style ‘easy fire and (so they hope) easy hire' policies which are supposed (despite the dismal post 1999 job creation record of the USA) to increase the number of jobs. But in the Norwegian case, not the number of jobs, but the number of hours has been flexible.
One of the hallmarks of the GFC has been that in some countries declining demand led to an increase of firing and a decrease of hiring, with rising unemployment as a result. Spain is an extreme example (see graph below). In some other countries, the problem was solved by decreasing the average number of hours worked. Norway is an extreme example. But in Germany the average number of hours also decreased so much that the number of people at work actually increased!
I'm not saying this solves all problems: it doesn't. But it's miles better than 20% unemployment.
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If Spain has a flexible labour market, I would hate to see a restrictive one.
Spain actually has a highly INflexible labour market. That’s why unemployment there is 20%. There is essentially a labour market apartheid in Spain between those on long term contracts with guaranteed employment, training, redundancy payments, pensions etc and all the rest who do not. I am not aware of anything comparable in the rest of Europe.
The more difficult it is to fire someone, the more reluctant employers are to hire. And from what I’ve heard, it’s easier to get a divorce then to fire a full-time employee in Spain. As a consequence, employers now prefer to hire temporary workers that are far easier to let go if the need arises.
Britain has a flexible labour market and in fact many of the things described by Knibbe in Norway also occurred in the UK – we also reduced our hours and reduced our pay. So Knibbe is actually proving that flexible labour markets tend to be associated with lower levels of unemployment over the cycle. Then of course there is the small matter of the euro – Norway is not a member; Spain is.
I said and so did the article that Spain was inflexible
Which makes all else you say wrong
To accurately judge this matter, I feel you have to look at how each country also defines “unemployed”. For example in some countries, (Australia, Canada, and some States in America), unemployment is measured by calculating how many people go to job centers without work and look for work and netted out by the same people that are on the dole.
Clearly that’s not too scientific. There are plenty of people in Spain for example that work illegally, under the table, with no work permits. Typically domestic workers from Latin America, reprensenting a material part of the population. Then there’s romanian laborers who work in the agriculture sector who are also cash no tax under the table employees that don’t get measured.
The difference may be what the article states, but is probably MORE influenced by the method of measurement – good ol’e heisenberg uncertainty principle…
Well here you go, this is how they’re defined:
http://portalseven.com/employment/unemployment_rate_euro.jsp?region=no
Under: “Statistical concepts and definitions”
So naturally the ‘black’ economy in Spain is considerably larger than in Norway. Latinos speak Spanish, nobody else from a third-world country speaks Norwegian.
700K migrants were given amnesty in 2005:
http://www.workpermit.com/news/2005_05_10/europe/spain_grants_legal_status.htm
Some articles estimate up to a million migrants from Latin America are working in Spain illegally.
Combine this with the fact that the ‘picaresca’ world view of most Spaniards is, why report your income if you don’t have to? You think tax avoidance is annoying here, tax evasion in Spain is a national sport! Especially in the pleb classes….