European Labour Markets’ Unemployment Problem

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The labour market problem is an age-old issue in the European region. There is also a big difference between the U.S. and European labour markets, which can be witnessed in terms of both the structure and performance. For example, the unemployment rate of U.S. is comparatively much lower than that of the U.K and Germany. Some of the innate problems of the European labour market are lower employment cost, weaker labour protection, job turnover, and higher mobility of the labourers. However, the self-employment is also high in all the European nations. As a result, a valid reason can also be witnessed why start-ups in Europe are found in surged numbers. The employment market of Europe is changing drastically thereby creating a range of issues for the job seekers. Some of the non-standard forms pertaining to the employment are the fixed-term contracts and part-time works. Even the telework and self-employment are popular over there. Hence, the trends are altering thereby leading to negation of various conventional employment patterns. Right from the contract form to the working time is changing rapidly. Furthermore, delving deeper into the subject, it can be understood how quasi self-employment has led to the negligence of various social protection aspects. On the contrary, the dependent employees enjoy a lot more number of protections. Moreover, the employment rate’s enhancement is a major political issue in almost every nation of Europe. In this paper, it will be elucidated how the European labour markets will be encountering employment issues, in bits and pieces, where a consistent pattern may remain largely absent.

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Hardly anyone can tell how the European Union will be affected after the completion of Brexit referendum procedure. The labour market performance is actually determined by a plethora of institutional factors and the policy options. Moreover, the labour market can largely reflect on various aspects including the corporate behaviour, residency requirements, visa quotas, trade agreements, and corresponding reactions. Most importantly, each and every one, dwelling in the EU region, may not feel the impact of labour market disruption that will be occurring in the near future, due to Brexit
(The Brussels Times, 2016). On the other hand, the EU-nationals are going to get affected by this very change, especially if they are working in U.K. The net number of migrations witnessed for the last 10 years is 100,000. To be more precise, the inflows were more than the average figures. A majority of the nationals of EU are young and thus they contribute largely in the nation’s tax department. The proportion of young employees is more than that of the U.K.-born ones. On the contrary, the non-EU nationals are also less in number.

From the above figure (1), it can be witnessed how EU workforce has been distributed in several industries, working in U.K. For example, in the agriculture sector, almost 20,000 employees can be observed while other sectors such as finance, transport, energy, construction, retail, and other services comprise of the remaining workforce.

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Interestingly, the U.K.-born feel threatened that their jobs are at risk because of the high rising immigrants. As a result, the downward pressures and job competition are high enough, which are ultimately affecting their wage rates. On the other hand, the residents of U.K. often neglect the fact that the surged immigrants’ number lead to rise in the market demand (Hennig, 2017). Some of the basic commodities are in high demand, in U.K. including the clothes and foods. Hence, the fall of wage rate is not an acceptable explanation of the immigration rate’s increase. As a result, both the immigrants and the U.K. market will feel the Brexit’s effects on them.

According to the analysts, U.K.’s labour market is quite puzzling in nature. Definitely, the recession and unemployment rate are interlinked with one another. In August 2017, the unemployment rate dropped to almost 4.4. percent. The unemployment rates of U.K. were remarkable in the past few years. However, it again decreased to a large extent, in 2017’s August. Alternatively, it cannot be denied that the same is little confusing for the experts. Arguably, other metrics pertaining to the labour market have not improved since 2011. For example, productivity is one of the most crucial and commonest metrics of a nation’s financial health. It indicates the rising standard of living. However, the same hardly improved at all. In the last two years, the households had to squeeze largely because of the restrictions in the wage rates. The employees were refrained from enjoying better standard of living because of their inadequate wages. Therefore, even though the U.K. market is flooded with jobs yet the employees are not able to overcome their household expenses due to the wage rates. On the contrary, the England’s bank is not taking any risk to increase the wages. After all, it is one of the prime components of establishing high inflation rate.

Another observation is evident in this aspect as well. For instance, the immigration rates have decreased to a large extent since the time of Brexit votes. It also helped in tightening the very labour market of U.K. as well (Wadsworth, Dhingra, Ottaviano and Van Reenen, 2016). Noticeably, the number of immigration is more from the EU nations, instead of other countries. Thus, the labour market is deemed to get affected once the time intensifies for leaving EU. On the other hand, the labour forces from the North West have started to join the job market, after a long spell of inactivity. Most of them are of working age. It is another reason for the decreasing unemployment rate in U.K. than any other nations of the EU.

Apart from all these things, it is crucial to remember that the businesses also determine the employment rate greatly. For example, wage rates determine the retention rate of an organisation. As a result, several political uncertainties are making the businesses more vulnerable to responses pertaining to the labour market itself. It can be observed how import costs are rising to boost the domestic economy (Klekner, 2016). Moreover, some of the EU nations will also become quite uncooperative towards the organisations operating in U.K. However, the repercussive effect cannot be avoided by the EU countries’ organisations.  Hence, the heated-up import costs will also disrupt the employment rate of those nations, simultaneously.

In the above-section, it has already been discussed that the EU nations’ youths are in jeopardised situations in respect to the employment conditions. Most of them are unemployed as well. On the contrary, these youths have found their preferred jobs in the U.K.’s labour market. However, several restrictions which will be implemented in the employment genre of U.K. may lead to a drastic change in the employment rate of the EU, amongst the youths. The transition from the academic life to the employment world is a difficult one in various countries of the EU region (Khan, 2017). There are primarily two main aspects which get affected by the same; one is where the labour market participation is mostly between the ages 15 to 24 years and secondly, many youngsters who undergo education also remain employed simultaneously. Hence, an overlap can be witnessed between the education aspect and the labour market. A familiar trend can be witnessed in this section as well (Gordon, 2014). For example, nowadays, the European youths tend to take up courses for a longer period of time. At times, they also return to education after a brief employment life, especially when the wage rates are not satisfactory. They also join the employment world in the later parts of their life. The youth unemployment rate was definitely high in the Italy and France, mostly two decades ago. On the other hand, the labour market reforms and the European unemployment rates are intricately related with each other. Both the demand and supply sides of the labour market should be targeted by the EU nations, to overcome the challenge of immigration, in correspondence to the young people mobilising to U.K., in search of the jobs (Dimian, Ileanu, Jablonský and Fábry, 2013). One of the core aspects which had eased the employment rate of Europe, few years ago, was some cyclical measures, for example, the monetary policy easing. However, the structural reforms cannot be negated at any instance and that is why measures are needed for the same as well. Along with the youth employment, another type of unemployment, i.e., the long-term one can also be noticed in different EU countries. On one hand, the U.K.’s labour market is quite enticing for the youngsters whereas other countries of EU are lagging behind largely. The countries such as Greece and France’s unemployment rates are almost proximate to the average of the pre-crisis historical era, as of now (Campos, Aynaoui and Loungani, 2016). However, the average itself is extremely high. In the coming years, the push factors in regards to the migration are expected to remain fortified (Cahuc, Carcillo, Rinne and Zimmermann, 2013). The political barriers will also remain evident in the case of migration. On the contrary, the labour market largely got shaped by the important roles played by none other than the capital market. Alternatively, most of the focus was always on the labour market’s movement. The unemployment swing is quite sharp in Europe as the same has been enhanced by the economic and financial integration. In fact, the financial integration led to many instances of international spill-overs. On one hand, the capital-exporting nations are the beneficiaries of various deregulation policies while their counterparts, i.e., the capital-importing nations have to face stringent regulations (Kruppe, Rogowski and Schömann, 2013).  Hence, it is quite clear from the above-analysis how European region is actually gloomy right now, in respect to the unemployment issue. On the other instance, it is evident that all the labour market outcomes of the domestic market are actually shaped by the varying global market integration factors. As a result, the countries facing a higher number of migrations are definitely benefiting from several spheres but varying numbers of social and political oppositions also remained prominent, in this case.

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Contradictorily, the economic development of EU has drastically decreased because of the Britain’s exit. In contrast to this incident, the unemployment forecast is comparatively positive. Even though a few nations are doing well yet the scenario is not uniform throughout the region (Eurostat, 2017). Contrary to the popular belief, U.K. is not facing as many hindrances as expected by different EU countries. As per the data, the unemployment rate of Spain, Greece, Italy, and Cyprus are 19.2, 23.1, 11.9, and 14.2 percent, respectively. They have also secured the top positions in the unemployment rate list (
Tanveer Choudhry, Marelli and Signorelli, 2012). On the other hand, the list’s opposite end features the nations such as Czech Republic, Germany, and U.K.  Britain is leaving EU as slow as possible. It also indicates that the Germany’s role is going to fortify in the near future, even more than before, for the economic development of the European Union. The current Britain government wants to opt for a hard Brexit, which can prove to be detrimental for the labour market scenario, in both the regions of EU and U.K. (Burda and Wyplosz, 2013). For example, various duties and non-tariff barriers can be imposed by Brussels. The Berlin government has already planned a way out for dealing with the unemployment issue of EU and thus, in the coming years, unemployment rate will decrease. The increased market demand is high because of several number of migrants in U.K. Therefore, after the completion of Brexit, high chances are there that the U.K. companies will start to suffer from the perspective of market demand (MacLeod and Roberts, 2017). On the other hand, the young and talented employees will also decrease in number, in U.K., because of the dip in migration rate.


It can be inferred from the above-discussion that the disparity in unemployment rate will remain high once Britain from the EU. According to the predictions, the change in migration rate will actually affect the U.K. businesses. It is even truer if Germany can take up adequate responsibilities to change the entire employment market scenario, of the EU. In fact, it has started to prepare for the same. As a result, in future, the unemployment rate of Britain will rise up to 5.4 percent. Contradictorily, the EU unemployment average will still be higher than the U.K. The reason is quite simple. Other immigrants from the developing nations are likely to move in U.K. and keep the rising market demand intact.

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  1. Burda, M. and Wyplosz, C., 2013. Macroeconomics: A European text. Oxford: Oxford University Press.
  2. Cahuc, P., Carcillo, S., Rinne, U. and Zimmermann, K.F., 2013. Youth unemployment in old Europe: the polar cases of France and Germany. IZA Journal of European Labor Studies, 2(1), pp.18-25.
  3. Campos, N., Aynaoui, K., and Loungani, P., 2016. European unemployment and labour market reforms: A two-handed approach.
  4. COMPAS. 2016. Brexit and the UK Labour Market.
  5. Dimian, G.C., Ileanu, B., Jablonský, J. and Fábry, J., 2013. Analysis of European labour market in the crisis context. Prague Economic Papers, 22(1), pp.50-71.
  6. Eurostat. 2017. Youth unemployment.
  7. Gordon, S., 2014. Biggest job in Europe is reforming labour markets.
  8. Hennig, B., 2017. In Focus: Europe’s uneven development.
  9. Khan, M., 2017. Analysts react to the UK’s puzzling labour market.
  10. Klekner, R., 2016. EU unemployment: Declining, but dependent on labour mobility.
  11. Kruppe, T., Rogowski, R. and Schömann, K., 2013. Labour market efficiency in the European Union: Employment protection and fixed term contracts. London: Routledge.
  12. MacLeod, A. and Roberts, L., 2017. We are going to face a massive employment crisis after Brexit.
  13. Tanveer Choudhry, M., Marelli, E. and Signorelli, M., 2012. Youth unemployment rate and impact of financial crises. International Journal of Manpower, 33(1), pp.76-95.
  14. The Brussels Times. 2016. Uneven economic growth and high unemployment in Europe.
  15. Wadsworth, J., Dhingra, S., Ottaviano, G. and Van Reenen, J., 2016. Brexit and the Impact of Immigration on the UK. Centre for Economic Performance, LSE, pp.34-53.
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