Greece’s unemployment rate has shrunk over the past five years, but so has the labor force (that is, the number of people either employed or looking for a job) — a result of multiple factors, including retirement, emigration and the fact that unemployed people who quit looking for a job are not considered part of the workforce. In the fourth quarter of 2016, according to the Hellenic Statistics Office, 3.64 million people had jobs in Greece, virtually the same as a year earlier. As in Portugal and Spain, unemployment in Greece fluctuates seasonally: employment rates rise in summer and decrease in winter. While the total number of people with jobs in Greece rose from 2015 to 2016, the figure is still below what it was in 2012. Moreover, official statistics tend to hide the fact that hundreds of thousands of Greek workers have accepted jobs that offer either low pay or only part-time or temporary status. According to Eurostat, the percentage of involuntary part-time jobs — those held by workers who would rather have full-time employment — in Greece rose from 45 percent to 72 percent over the past decade.
As in Spain and Portugal, the Greek government sought to limit wage growth during the height of the economic crisis with policies such as those replacing collective bargaining with company-based collective agreements. According to data compiled by the Organization for Economic Co-operation and Development, the average wage in Greece fell by 20 percent between 2009 and 2015. Meanwhile, labor costs per hour have dropped by 15 percent since 2008. Greece is the only eurozone country where the minimum wage is lower today than it was a decade ago. But broader and deeper reforms to make the Greek economy more competitive, including modernizing the country’s education system, moving toward deregulation in some areas, and accelerating the privatization process, have been only partially introduced. Tax hikes and spending cuts introduced during Greece’s three bailout programs have cut domestic consumption and turned a recession into a depression.
Italy offers another interesting case: unemployment never reached the levels it did in Greece, Spain or Portugal, but joblessness has resisted the efforts by several governments to decrease it. Since 2012, the unemployment rate has consistently hovered above 11 percent. (It was 6 percent a decade ago.) Unlike Spain or Portugal, Italy did not respond to the crisis with a unified package of comprehensive labor reforms, but instead implemented a series of smaller reforms, most notably during the governments led by Mario Monti in 2012 and Matteo Renzi in 2014. These reforms sought to weaken protections against dismissal for permanent workers and to increase protection for the unemployed.
In spite of the reforms, the pace of job creation has not fulfilled government promises. According to Italy’s statistics office, 22.8 million Italians had a job in the fourth quarter of 2016 — a modest increase from the 22.4 million registered four years earlier. At the same time, the proportion of the country’s working-age population with jobs grew from 56.3 percent to 57.4 percent. However, many people have been unable to find the kind of job they want. According to Eurostat, the number of Italians working part-time grew by almost 10 percent between 2002 and 2015, while the average increase for the European Union during that period was 4 percent. Of Italians working part-time, six in 10 would rather have a full-time position. That ratio in 2007 was less than 4 in 10.
Political issues certainly play a role in the trend, as Italian governments tend to be fragile and subject to pressure from multiple sources, including from trade unions and local and regional economic and political interests, making reforms difficult to introduce. Italy also remains beset with pronounced geographic contrasts, as employment rates remain considerably higher in its relatively less-developed and largely agricultural south than in its industry-heavy and more prosperous north. Italy’s weak economic growth does not support robust job creation, another factor keeping unemployment numbers high. Since Italy’s economy emerged from recession in 2014, it has not exceeded 1 percent annual growth.
A Potential Threat to Long-Term Growth
Job insecurity is not exclusive to the southern members of the eurozone: Countries in Central and Eastern Europe like Poland and Bulgaria also have high rates of temporary employment or jobs with low salaries. And a high number of jobs in wealthier countries like the United Kingdom and Austria include employment conditions that labor rights, such as “zero hour contracts” that offer no guaranteed minimum hours of work.
But unemployment rates rose faster in Southern Europe, where the crisis hit harder. High unemployment and insufficient economic growth in that region exposed the fragility of the banking sectors in several countries, raised questions about the sustainability of their public and private debts, and created a fertile ground for the emergence of anti-system political parties that could threaten the survival of the eurozone.
The creation of temporary and precarious forms of employment is a normal phenomenon during the early stages of an economic recovery. Over time, however, they could drag down an economy by limiting the room for growth in domestic demand, for example. In addition, rising income inequality feeds growing social and political tensions. While unemployment rates are dropping across the board, issues such as job insecurity, low pay, long-term unemployment, and few opportunities for training or career advancement could weigh down Southern Europe’s incipient economic recovery.
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