More Tax-Paid Eurocrat Nonsense

There is a new report out from the Eurocracy in Brussels. The website refers to it as the:

Joint Employment Report, published by the European Commission as an annex to the Annual Growth Survey 2014

With such a prominent status, you would expect the report to deliver some very deep and useful insights into how Europe can get out of its unending recession. Well… as the article continues, we learn that once again there is an inverse relationship between the lavishness of a government bureaucrat office and the productivity of the people who occupy it:

Unemployment remains at unacceptably high levels in the 28 EU Member States even if it has stopped growing. Youth unemployment remains at particularly high levels, long-term unemployment is still rising and poverty and inequality have increased in several Member States.

Unemployment stopped growing?? Let us consult unemployment figures from Eurostat for the EU states that have thus far reported their numbers for the third quarter of 2013. Of those 21 states, 14 have seen their unemployment increase since the third quarter of 2012. Five of them have seen unemployment go up by one percentage point or more.

Five reporting member states have experienced a decline in unemployment; the decline is one percent or less. Two states report unchanged unemployment.

For the EU as a whole this means a rise in unemployment by one half of a percent and a 0.7 percent rise in the euro area.

The increase in youth unemployment is marginally smaller, 0.6 percent for the euro area and 0.4 percent for the EU-27. These numbers, though, are based on reports from only 20 member states, with, e.g., Greece not reporting. When we have the total figures for the third quarter, the increase is probably going to be larger.

With the facts straightened out, let’s return to the article:

In addition major divergences between countries built up throughout the crisis still persist, in particular between the “core” and the “periphery” of the euro area. All this may hamper a quick return to strong GDP growth.

This is odd. Growth comes from free enterprise and free consumers feeling confident – and being financially able – to spend more money. “Divergences between countries” do not change the conditions for growth in each particular country. The mechanics are the same.

The EU Business article tries to give some shape to the “divergences”…

Employment rates have continued to fall, due in particular to the decrease in the number of unemployed finding jobs. Although the number of job vacancies has not changed much unemployment has been on the rise, indicating that the lack of labour market opportunities cannot be met without investments in human capital and better support to the unemployed.

…and essentially conclude that what the no-growth European economy needs is more government-paid programs that train and educate the unemployed. But how about instead creating a better economic environment for private citizens to go about their business without constantly running into government taxes and regulations?

Apparently not. Instead, as the EU Business article continues, focus is still on what sociologists refer to as “stratification”, or inequalities in statist lingo:

…segmentation in the labour market continues to be considerable. The risk of poverty and social exclusion as well as inequalities have grown significantly in a number of Member States driving an overall increase in the EU. Better performing social protection and targeted social investment are essential to reduce inequalities and poverty over time.

Which means more government spending on more government entitlements, requiring more tax revenues from already over-burdened tax payers.

When will Europe break out of this vicious cycle of non-solutions to major problems? Listen to this part of the EU Business article, which delivers a pure-bred litany about how governments rearrange the deck chairs on the Titanic:

They promoted measures to boost female employment rates and to reconcile work and private life by introducing changes to early childhood education and care services and revising parental leave regulations. Employment-promoting initiatives also addressed barriers to longer working lives. Several Member States have made changes to the level of minimum or public wages and addressed wage-setting mechanisms, including wage indexation, and collective bargaining processes. Many countries took tax measures to promote job creation and have continued to support initiatives exploring job-rich sectors. Some Member States used employer subsidies and promoted entrepreneurship while some additional measures have been taken to address the issue of undeclared work. Finally many Member States continued to introduce changes to their employment protection legislation to address the balance between flexibility and security and address the segmentation of the labour market. Improving skills supply and promoting adult learning became a priority in several Member States Some countries introduced measures that facilitate school to work transitions and focused on improving vocational education and training systems.

You can breathe now. Not a single one of these measures will have any detectible effect on unemployment,and the reason is simple: they do not address the fundamental reason why there is such poor job creation in Europe, namely lack of spending in the economy. Foremost among them is private consumption, which in 2012 in the EU-27 declined by 0.7 percent. Eurostat forecasts that it will decline by 0.1 percent in 2013 as well. The corresponding numbers for the euro area are -1.4 and -0.7, respectively.

With the leading private-sector spending variable in stagnation or decline, it is foolish to expect the labor market to improve. Europe’s governments can make all the changes they want to their labor market; so long as consumers do not increase their spending by at least two percent per year, Okun’s Law tells us that there will be no sustained change for the better on the labor market.

Once again, the European Commission has put its macroeconomic ignorance on full display. This is sad for a number of reasons, the most important one of course being that under their leadership Europe will continue its journey into the macroeconomic shadow realm.