Unemployment and job creation in the EU

Describe the extent of unemployment across the EU

The unemployed are people who are registered as able, available and willing to work at the going wage rate but who cannot find work despite an active search for work.

It can be seen in Extract G that the standardised unemployment rate in Eurozone is 8.3% which is 2.2% higher than in the UK and 1.5% higher than in the. However, it would be useful to have figures for more years in order to be able to analyze the trend. In addition, some economists may argue that the data provided is biased and the actual figures are higher for the EU.

Extract F clearly shows that EU member countries with highest unemployment rate are Spain, Greece, Finland, France and Germany of 9% and higher. Countries with lowest unemployment rates are Luxembourg and Netherlands with unemployment of less than 3%.

It is important to notice that there is no data available for hidden unemployment and we also don’t know the extent of inactive people (those people who gave up searching for job and don’t receive unemployment benefit) across the EU.

Explain the main causes of unemployment in the EU

In order to explain the causes of unemployment it is necessary to consider different types of unemployment.

The most obvious type of unemployment is frictional. It takes place when people are moving between jobs or searching for their first jobs e.g. university graduates. It may take them some time to find a job at wage they are ready to accept. Imperfect information may make frictional unemployment worse if the jobless are unaware of the available jobs. Additionally, disincentives occur when unemployed people realise that they get more income by claiming unemployment benefit and staying at home rather than going to work and pay tax on income.

The other type of unemployment is cyclical that occurs due to a lack of demand for goods and services. When there is a...

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