Unemployment

The post-World War II period in Europe was characterized by sharp rises in unemployment resulting from the wartime destruction of many industries, the addition to the labour force of large numbers of war veterans, and a variety of consequent economic maladjustments. US aid under the European Revovery Program (or Marshall Plan) helped the highly successful efforts of Western European countries to rehabilitate their industries and provide employment for their workers.

Most of the major non-socialist industrialized countries had low rates of unemployment by the 1950s. In the 1960s, when the US unemployment rate averaged 5 to 6 per cent, only Canada had a higher rate (7 per cent); Italy had a rate of 4 per cent, and all the other Western European industrial nations, as well as Japan, had rates of about 2 per cent or less. Attempts to explain these disparities focused on social and economic differences among nations, including the following: measures taken in European countries to reduce seasonal unemployment by spreading work over the year; European practices of placing youth in their mid-teens into apprenticeship and other work-training arrangements that promoted job stability; legal restraints in some countries against laying off workers; extensive retraining programmes for unemployed workers to update their skills; and attachment of workers to their jobs in both Europe and Japan. However, by the 1990s this situation had been largely reversed with the US unemployment rate being well below that of most European countries. This persistent high unemployment within the European Union was attributed to structural problems and inappropriate labour legislation driving up the costs to employers of employment, a diagnosis borne out by the example of the United Kingdom, where reform of the labour market during the 1980s apparently resulted in higher rates of job creation. By 2004 unemployment in the UK had been reduced to about 1.4 million—a rate of 4.8 per cent of the workforce—from a high of more than 3 million in 1986.

In developing nations in Asia, Africa, and Latin America a much more serious and widespread problem is underemployment—that is, people are employed only part-time or at work that is inefficient or unproductive, with a correspondingly low income that is insufficient to meet their needs. Much of the unemployment and underemployment in developing nations has accompanied migration from rural to larger urban centres.

In industrialized countries, with unemployment insurance and other forms of income maintenance, unemployment does not cause as great a hardship as it once did. Nonetheless, there are signs that unemployment is becoming a far more intractable feature of certain developed economies than hitherto thought, especially with the replacement of Keynesianism by monetarism as the predominant economic creed. France, Italy, and Spain in particular face the problem of apparently ineradicable high structural unemployment, while other countries, such as Japan, which at first seemed able to sustain low unemployment rates through recessions through practices that would be denounced as crippling by many other countries, are increasingly forced to make redundancies in the manner of other advanced economies. The problem of modern governments is how to get the benefits of economic flexibility and rising productivity while reducing the number of unemployed workers, keeping their spells of joblessness short, maintaining their income, and helping them return to work with viable skills.