Fighting Unemployment: The Limits of Free Market Orthodoxy

By David R. Howell | Go to book overview

10
Unemployment and Labor Market
Institutions: An Assessment

DAVID R. HOWELL

Though it remains widely accepted that high unemployment is a “European” problem, just a glance at the data will confirm that over the past two decades the standardized unemployment rate has varied widely, both across the developed world and within Europe. Equally significant, the mix of high- and low-unemployment countries also changed markedly over this brief period. Denmark, the Netherlands, and Ireland switched from high- to low-unemployment countries between the 1980s and the 1990s, Sweden and Germany did just the opposite, and the United States went from the middle of the pack in the early 1980s to being one of the best performers in the mid-1990s and then slid back to the middle as the developed world edged into recession in 2001–2002. Often overlooked in the 1990s in the rush to embrace market fundamentalism and to applaud the American model was the fact that several European countries with strong welfare states have consistently reported unemployment rates well below that of the United States (Austria and Norway). At the same time, other European welfare states, characterized by some of the lowest levels of wage inequality and the highest levels of social protection in the developed world, experienced substantial declines in unemployment over the 1990s, reaching levels that are now below that of the United States (e.g., Denmark, the Netherlands, and Sweden). The United Kingdom and Ireland also currently report lower rates than the United States, and, while still high, unemployment rates for Canada, Spain, and France have declined sharply, resulting in substantial convergence toward U.S. levels. Still, a serious unemployment problem remains. Four large European countries—France,

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