Chapter 7: The European unemployment problem: a structural approach
Michael Landesmann and Robert Stehrer1 1. INTRODUCTION In this chapter we examine an important dimension of structural change which has so far been insufﬁciently accounted for in the discussion of high levels of European unemployment, especially its development over the 1980s and 1990s. A detailed examination of sectoral employment patterns shows that a signiﬁcant group of (continental) European economies experienced continued high (and even growing) rates of labour shedding out of manufacturing over the late 1980s and the 1990s (‘deindustrialization’) and, at the same time, a signiﬁcant break in rates of employment absorption in the social services sector (ISIC 9: community, social and personal services), a sector which now accounts for the highest share in total employment of all sectors. Neither of these features can be found for the USA (or the UK) and hence we argue that they contribute towards an explanation of the additional hikes in unemployment rates in (continental) European economies as against the USA and the UK from the mid-1980s onwards. The analysis proceeds through a careful examination of changing sectoral employment patterns across different OECD economies and discusses reasons for inter-country differences in the time patterns of deindustrialization and employment absorption in the different service sectors. We also discuss theoretical reasons why the overall unemployment situation should be affected by the characteristics and the speed of sectoral structural change. Further, we suggest a theoretical model showing why the structural break in the relative employment absorption capacity of the welfare services sector might...
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