Chapter 1: Long-term structural changes: a reappraisal
Christopher Freeman 1. UNEMPLOYMENT AND ‘LONG-WAVE’ THEORIES OF STRUCTURAL CHANGE Economists have conventionally classiﬁed unemployment into several different categories, and policies have typically been devised to deal speciﬁcally with one or other of these types. From the 1950s until the 1970s the aggregate level of all types of unemployment combined was generally less than 3 per cent of the labour force in most European countries, with the important exception of Italy. This rather low level of unemployment was often deﬁned as ‘full employment’ and although short-term cyclical unemployment sometimes pushed the level temporarily above 3 per cent, the labour market situation in Europe in the 1950s and 1960s could fairly be characterized as one of ‘full employment’. All this changed in the 1970s, and, in the 1980s and 1990s, levels of unemployment were typically higher than 3 per cent in almost all European countries, often far above this level. As early as 1977, the OECD McCracken Report showed some anxiety about this situation, which it attributed to the OPEC crisis of 1973 and its destabilizing effect on prices. The majority report somewhat complacently assumed that the OECD countries could return in a relatively straightforward way to the halcyon days of the 1960s, with full employment and high rates of economic growth. However, a minority report already raised the issue of structural unemployment, which since then became a major focus of the European debate and increasingly of the worldwide debate, together with Keynesian unemployment. This chapter will seek...
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