As indicated in this chapter, a key goal of ALMPs is the need to reduce long-term unemployment. Figure 6 charts long-term unemployment (that is, those unemployed for 12 months or more) by the percentage of the active population from 2005-2015. This shows that the MME average of long-term unemployment began to rise at the onset of the Eurozone crisis, and peaked at around 10% of the active population by 2014. Portugal followed a similar trajectory to the MME average up until 2013 where long-term unemployment began to fall. Meanwhile, the CME average of long -term unemployment was relatively stable, hovering at around 2% of the active population. For Germany, long-term unemployment was much higher prior to the Eurozone crisis in comparison to the CME average (6%), but by 2012, this was more closely in line with CME average (at around 2%).
Figure 6: Long term unemployment by % of active population by CMEs, MMEs, EU average, Germany and Portugal (2005-2015)
Source: EU LFS, available at Eurostat
Note: those who are long-term unemployed have been unemployed for at least 12 months. While active persons in the labour market include those, who are either employed or unemployed.
From the literature and long-term unemployment figures, it appears that both Germany and Portugal were relatively successful in reducing long-term unemployment. However, Theodoropoulou (2018, p7) discusses how ALMP measures tend to be more successful when there are enough jobs for those seeking them. In the case of Portugal, this meant it was harder for their activation policies have the desired effect, as they had an oversupply of people seeking labour and there were significant financial restrictions on the budget of PES (ILO, 2014, p56). In contrast to this, Germany’s long-term unemployment rate started to reduce from 2006 onwards, and may relate to the earlier Hartz reforms which introduced non-standard forms of work to encourage those who were unemployed back to work.
5.4 Summary
In summary, there are some clear differences in the way Germany and Portugal have approached their ALMPs. Table 5 details a summary of the key ALMP measures used during the Eurozone crisis. In essence, while Germany has made small changes to its
training programmes and PES over time, Portugal was very much spurred on by high unemployment and the promises it made as part of its MoU to start prioritising ALMPs. Table 5: Summary of active labour market measures used during the Eurozone crisis
Overall, this chapter has shown that both Germany and Portugal have approached ALMP measures differently prior and during the Eurozone crisis, but both made some gains in reducing their long-term unemployment rates. For Germany, this reduction began prior to the Eurozone crisis, but similar to chapter 4, PES may have reduced long- term unemployment but increased the number of people in low paid work. While for Portugal, ALMPs were reformed in response to Eurozone crisis and seen as a means of stimulating labour market policies.
Germany Portugal
Training measures
Strong focus prior to the Eurozone crisis.
Made incremental changes to existing training
programmes to develop higher level skills.
Very little focus on training prior to the Eurozone crisis.
Implemented new training measures during
the Eurozone crisis, specifically targeting those on unemployment benefits and young people.
Public Employment Services
Continued focus on PES such as mini jobs and the ‘One Euro Job’ programme.
Improvements made to PES during the Eurozone crisis through offering wage subsidies to employers
Impact Long-term unemployment rate: reduced from 2006
Long-term unemployment rate: reduced from 2013
6
Conclusion
In essence, this dissertation has provided some powerful insights which contribute to understanding the broader picture in relation to some of the complexities relating to unemployment during the Eurozone crisis.
Firstly, it has shown that by isolating figures looking at those registered unemployed and in receipt of benefits, and spend on out of work maintenance, European countries did not act in a similar or consistent way over the ten-year period accounting for the Eurozone crisis. This challenges the work of some of the wider literature in this area that tends to focus on the broad category of unemployment spend to suggest that European countries make minimal changes over time. This dissertation has contributed to this area, by accounting for cross-national data and unemployment spend figures by individual spending categories, as looking at total unemployment spend can be highly misleading.
Secondly, this dissertation has shown that the Eurozone crisis has exposed how unemployment spend on out of work maintenance varied by particular country clusters, and accounted for new, emergent literature on growth models. This includes more European countries (than the varieties of capitalism classifications) and separates out the LME cluster which has been problematic, as the UK and Ireland had very different experiences of the Eurozone crisis. Through carrying out data analysis on varieties of capitalism clusters and growth model clusters, there is evidence to suggest that there is a relationship by both types of clusters and spend on out of work maintenance during the Eurozone crisis. However, through further statistical testing (using the Dunn test) the results showed that only one paired comparison was significant, that is, the CME cluster by the ‘Other’ cluster.
Finally, in testing the hypothesis that two countries in the Eurozone (Germany and Portugal) have responded to unemployment prior and during the Eurozone crisis in
relation to their varieties of capitalism classifications, an examination of their passive and active labour market policies supports this hypothesis. However, it is clear that their reasons for doing so may not strictly relate to their market response, and unemployment levels may have had a bearing on this.
In the case of Germany, labour market policies were deployed prior to the Eurozone crisis and incremental changes were made to help deal with the challenges presented by the Eurozone crisis. This included a focus on non-standard forms of work while also focusing on the development of higher-level skills. This accords with what is expected of CMEs and helped to maintain Germany’s competitiveness. However, greater flexibility in the German labour market has been argued to come at the cost of widening wage inequalities, and therefore challenges how successful it has been in practice. It also questions whether Germany is a role model of how to respond in challenging periods.
With regards to Portugal, prior to the Eurozone crisis it was clear that it operated in line with what was expected of MMEs, as there was little focus on skills and training, and lower value markets were pursued at the detriment of being competitive. However, through the MoU signed in 2011, Portugal has made a concerted effort to improve its passive and active labour market policies, by introducing targeted training and PES initiatives to reduce long-term unemployment. However, it is unclear how sustainable these policies will be in the long term.
In looking to the future, a recognition of how and why EU member states behaved differently in relation to unemployment during the Eurozone crisis is important. This can help labour market policies to be effective during challenging periods, and provide valuable lessons for the future. As a way forward, this dissertation has been a useful starting point for more research to be undertaken on the component parts of unemployment spend by European countries, and the inclusion of cross-national data sources.
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