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Long-term unemployment is becoming a structural problem for the EU

Long-term unemployment is one of the biggest challenges faced by any labor market. The longer a person goes without work, the harder it is for them to get a foot back in the door. Our study shows that, particularly in southern EU states, long-term unemployment is becoming a structural problem and a burden on the entire economy.

Foto Daniel Schraad-Tischler
Dr. Daniel Schraad-Tischler

Long-term unemployment has become a fundamental problem for the European labor market since the financial and economic crisis. Of the 22 million unemployed workers in 2015, nearly half had been without work for more than twelve months and almost a third for longer than two years. Particularly in the southern EU states, like Greece, Spain, and Croatia, long-term unemployment is still alarmingly high eight years after the start of the crisis. And: The extent of the unemployment crisis is actually significantly greater than is suggested by the figures for long-term unemployment, because the phenomenon of  hidden long-term unemployment is not taken into account. That shows our Europe wide comparative study.

Long-term unemployment in the EU shows a north-south divide and affects different groups

The study shows that there is a clear north-south divide on the European labor market: In Greece, Spain and Croatia about 18, 11 and 10.4 percent of the labor force are unemployed over the long term - clearly more than across the EU as a whole, where its 4.3 percent . In contrast Great Britain, Sweden and Luxembourg have the lowest long-term unemployment rates with 1.5 and 1.6 percent.

While long-term unemployment is most prevalent among low-skilled workers in almost every country, in Greece, Spain, and Croatia long-term unemployment also affects more than 10 percent of workers with mid-level qualifications and in excess of 5 percent of highly qualified individuals.

"Long-term unemployment has become a mass phenomenon in certain countries and poses a threat to Europe's economic recovery. Long-term unemployment does not only affect public finances; it also has a negative impact on those people who are left without prospects for too long and who therefore lose faith in the government and the market economy."

Aart De Geus, Chairman and CEO of the Bertelsmann Stiftung Executive Board

Mass phenomenon hidden long-term unemployment

To demonstrate the full extent of the unemployment crisis in Europe, the study also includes figures for so-called hidden long-term unemployment. This includes, for example, jobseekers, who are not considered to be unemployed because they are participating in labor market measures, and those, who wish to work, but are no longer actively seeking employment, having been discouraged by their failed efforts. Across the EU these are 11 million people. Hidden long-term unemployment is particularly high in Italy. Here, 9.1 percent of the working age population are willing to work, but are not included in the unemployment figures.

More than 22 million people in the EU are willing to work, but cannot seem to get a foot in the door. It's high time the politicians do more to exploit this untapped potential."

Aart De Geus, Chairman and CEO of the Bertelsmann Stiftung Executive Board

Southern Europe: Mismatch between supply and demand in the labor market

The study found that a key reason behind the ongoing unemployment crisis is the impact of the financial and economic crisis on the labor markets in southern Europe. The crisis highlighted serious structural weaknesses in the economic models of the southern EU states. Real wages have declined significantly since 2010, and extensive labor market reforms were introduced in most countries. Yet employment recovery has been far too weak so far to significantly reduce long-term unemployment. One reason is that in many countries suffering from particularly high rates of long-term unemployment, there is a growing mismatch between supply and demand in the labor market. Sectors such as industry and construction were particularly affected by the crisis. The workers, who were laid off in these sectors, now lack the skills necessary to find a job in other industries. Training and further education measures are scarce goods.

Unbalanced austerity policies of the EU threaten to cement long-term unemployment

A fundamental prerequisite for the high rates of long-term unemployment to be reduced is a greater demand for labor by employers. The study experts recommend a mix of growth-oriented investment and active labor market policy measures be adopted. Spending on active labor market policies like job intermediation services, vocational and further training, and hiring incentives for companies is especially low in the countries with particularly high long-term unemployment and, in some cases, has declined even further due to the austerity policies adopted in recent years. Yet without this support, many of the long-term unemployed have few prospects of new employment. The creation of effective public employment services that assist jobseekers early on and with intensive support is therefore also a necessity.

Please find the complete study here.