Jobs renaissance in Europe?

Deutsche Welle
5 Min Read

At long last, the number of employed people in Europe now exceeds the 2007 pre-crisis level. But job gains are very unevenly distributed. Germany and Spain lead the pack in gains – but Spain has much further to go.Germany’s moderate, yet steady decade-long economic boom continues. A study released by the consultancy EY (formerly Ernst & Young) on Thursday in Berlin reported that nearly four million additional jobs have been created in Germany since 2007. In 2017 alone, 520,000 jobs were added on a net basis, EY said.

The prognosis for 2018 is rosy: EY believes another 400,000 jobs will be added in Germany, and expects GDP growth of just over 2 percent.

For the 19-nation Eurozone as a whole, EY expects about an increase of about 1.8 million jobs – which means 1.4 million outside Germany. And perhaps reforms that may be negotiated in 2018, proposed by France’s dynamic young President Emanuel Macron, will further improve the euro currency area’s prospects.

Spain is a bright spot in the picture, with its unemployment rate having gone from 19.6 percent in 2016 down to 17.2 percent in 2017. EY’s prognosis projects another 400,000 new jobs in Spain by the end of 2018 – outperforming Germany in jobs growth on a per-capita basis, albeit from a Spanish starting position of much higher unemployment: 17.2 percent in Spain compared to 3.8 percent in Germany, calculated according to International Labor Organisation (ILO) methods. Spain’s unemployment rate is the second-highest in the Eurozone, after Greece.

Unemployment in decline

There are different methods for calculating unemployment or employment statistics, depending, for example, on whether part-time workers or people in government supported job training programs are considered employed or not. The German government’s own unemployment calculation methodology puts the 2017 figure at 5.7 percent, substantially higher than the ILO’s figure of 3.8 percent. In any case, it’s the lowest rate in the Eurozone.

The 2017 unemployment rate in Germany was lower by 4.7 percent compared to 2007, according to ILO figures. In the Eurozone, only Slovakia and Malta have also had decreases in unemployment compared to the pre-financial-crisis year.

Greece’s unemployment rate in 2017 was higher by 13.2 percent compared to 2007, Spain’s by 9.0 percent, Italy’s by 5.1 percent, and France’s by 1.3 percent.

According to EY’s ILO-based figures, the number of unemployed in the Eurozone as a whole decreased from 10.0 percent to 9.2 percent during 2017. For 2018, EY prognosticates a further decrease in Eurozone unemployment, down to 8.6 percent.

“The trend reversal has been achieved,” said Bernhard Lorentz, EY senior partner for government and public affairs. “In 2017, for the first time, the number of employed people in the Eurozone exceeded that of 2007.”

However, the number of registered unemployed workers in the Eurozone continues to be higher than the 2007 figure. The reason for this apparent paradox is that the available labor force has grown over the past ten years, due to a combination of immigration and a higher percentage of women in the workforce.

Skills shortages emerging in Germany

For German companies, due to the decade-long period of economic growth in Germany, it is becoming increasingly difficult to fill vacant or new positions, according to Lorentz: “The labor market for academics and skilled workers, for example, has been swept clean in many places. This could become a real problem for Germany as a location, and a brake on innovation and growth.”

For internationally active companies, such skills shortages could tempt them to locate in other countries where such shortages aren’t a problem, Lorentz said, adding: “We therefore need a forward-looking migration policy. Immigration can make an important contribution to ensuring an adequate supply of skilled workers.”

One wonders whether an uptick in skilled immigration also help reduce German employees’ burden of unpaid overtime.

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