High Unemployment Rate In Euro Zone

High Unemployment Rate In Euro Zone

By: Laurel Morrison

New York Times’ article, “Unemployment in Euro Zone reaches a Record 12%,” goes into depth discussing the reason for the high unemployment and possible solutions to lower the rate.  The Euro Zone is a combination of seventeen countries of the European Union with the same legal currency, the euro.  This is considered an economic and monetary union (Samuelson, 605).  Since the Eurozone was created in 1999, the unemployment rate has gone down in Europe, but is still higher than the United States’. 12% Unemployment rate in Euro Zone means 26 million people without work across the 17 countries. The European labor market has been on a decline for 22 months straight (Jolly). Greece has the highest unemployment rate in the union at 26.4%. To try to stabilize Greece’s increasing debt, the union is trying to get each country to lower its government spending to prevent further debt. I believe this could backfire though, because government spending also stimulates the economy, which could be beneficial to lowering the unemployment rate. One reason there is such a high unemployment is related to wages becoming higher than productivity in recent months. Decreasing wages significantly and hiring cheaper labor can possibly correct this problem. Due to the high unemployment rate, the workers have little control in the amount of wages.  

Some possible solutions to the high unemployment rate in Europe mentioned in the article emphasized reducing labor market barriers and welfare benefits. I can see how this could benefit for the economy, because the large portion of unemployed completely relies on the welfare. If welfare was to be lowered and the government used this spending to stimulate the economy, then this could cause a decrease in the unemployment rate.  The article quoted Mark Cliffe, chief economist for ING group, describe this situation as “Europe is pursuing a policy that is self-evidently failing.” This just shows that without any intervention, the unemployment rate may continue to rise. By raising taxes and import tax, the government may be able to lower than raising debt. And if they lower export tax, then it may stimulate trade to create more jobs. While there may be many ways to affect the unemployment rate, too much intervention can also be harmful to the Euro Zone’s economy.

Work Cited

Jolly, David. "Euro Zone Unemployment Reaches a Record at 12%." The New York Times. The New York Times, 03 Apr. 2013. Web. 17 Apr. 2013.

(http://www.nytimes.com/2013/04/03/business/global/unemployment-in-euro-zone-reaches-a-record-high-of-12-percent.html?pagewanted=1&_r=0 )

Samuelson, Paul. Economics 19e. McGraw-Hill Irwin Inc., 2010.