Europe's Jobs Challenge

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Since the age of steam, the european labor movement has mustered the red flags and brass bands of May Day for a traditional show of strength. But as the union ranks gather this year, they don't face a classic battle for solidarity and a fair wage as much as they do a new specter haunting Europe in the information age — a labor paradox of a sort Karl Marx never envisioned. At a time when 15 million people are registered as unemployed in the European Union, millions of jobs go begging for lack of qualified applicants. At the beginning of the 21st century, it seems, the best encapsulation of the Old World's labor plight comes not from Marx, but from the English poet Samuel Taylor Coleridge: "Water, water, everywhere,/ Nor any drop to drink."

There is no technological fix for closing the jobs gap. Chip capacity may double every 18 months, but there's no Moore's Law for labor, in Europe or elsewhere. Europe's jobs dilemma, most experts agree, is grounded in an inflexible education system, high labor taxes, and barriers to mobility. The chronically high number of jobless — roughly half of whom have been out of work for more than a year — is just part of the story. "There are twice as many people in Europe who would work, if work were available, than there are people currently recorded as unemployed," European employment Commissioner Anna Diamantopoulou pointed out recently. Leaders have begun to recognize the vital need for Europe to put that vast potential to use. That means promoting lifelong learning, lowering taxes on labor, and making work a paying proposition for the many Europeans who choose not to. Europe's overall fiscal health and strong growth prospects present a golden opportunity to tackle these reforms. Says European Commission President Romano Prodi: "We must act now, because the challenges facing us cannot wait."

The employment mismatch hits Europe coming and going. As E.U. countries spend billions on unemployment benefits and welfare, they also fall behind in the struggle to trim their sails for the Information Society. The number most often bandied about at the recent "dotcom" E.U. summit meeting in Lisbon was 1.7 million — that's the shortage of information technology professionals Western Europe will face by the year 2003, according to a study by International Data Corporation commissioned by Microsoft. European firms currently provide only 25% of the E.U.'s information technology needs, according to the European Commission, and American companies gladly fill the gap.

But it isn't just on the new frontier of the Information Society that workers are missing; there aren't enough hod carriers either. In France alone, as many as 50,000 construction jobs are unfilled, and there are another 20,000 or so open for truck drivers. Europe does not have enough accountants, welders or machine-tool operators, and as traditional production sectors become more service-oriented, there is a crying need for people with advanced technical skills who can also talk intelligibly to clients. University enrollment has dropped to below replacement levels for highly qualified but unglamorous professions like chemical and metallurgical engineers.

The result is a two-speed labor market that leaves millions of poorly qualified unemployed standing in a cloud of dust while those in demand speed past. For those in the fast lane the pickings are rich. "Businesses have to understand what many employees already know — that in a dynamic economy and labor market, employees have the ball," says Mercedes Saddier-Chetochine at the Association for the Employment of Managers in Paris.

Small employers like Jean Lathouwers, president of software producer LSA Delta in eastern Belgium, are learning that lesson painfully. "We have to pay new people more than they're worth," he says, "and the last to come are the first to go. We're moving toward a real American situation, and we're not ready for that." He says larger IT firms spoil the market with exorbitant salaries, but even giants face problems. "Not long ago candidates had to sell themselves," says Jan De Haes, human resource manager for Hewlett Packard Belgium. "Now we tell our recruiters to go into sales mode." Still, he has 58 open positions for everything from programmers to receptionists — right in Brussels, where the unemployment rate is 17.5%.

The shortage of IT workers isn't going to evaporate anytime soon, despite the burgeoning development of "application service providers," which can handle many back-office tasks for strapped companies online — and increasingly offshore. Andrew Parker, an analyst for Forrester Research in Amsterdam, recently surveyed chief information officers throughout Europe and found that 90% of them expressed concern that the lack of qualified personnel could have a tangible impact on their businesses. "Everybody is feeling some pain," he says.

No one was caught as flat-footed by the rush to e-commerce as Europe's educators. Employers throughout Europe bemoan the inadequate flow of technically literate graduates. Belgian universities turn out some 2,000 computer science graduates every year; the demand is closer to 6,000, says Karel Uyttendaele, director of Fabrimetal, an employers' federation that includes the IT sector. German universities have upped their capacity for IT students from 13,000 two years ago to 40,000 today, but that is still not enough, argues Ullrich Heilmann of the Rhine-Westphalia Institute for Economic Research in Essen. "The way it is now, you have professors standing in huge lecture halls talking to nobody about things nobody cares about, while IT courses are overfilled," he says. He calls for the creation of a system that forces universities to compete to be more responsive to the job market. MORE

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Europe needs a fundamental retooling of its whole concept of education, according to Hanne Shapiro, an IT learning expert at the Danish Institute of Technology. "We have to break the monopoly of the educational institutions and move to a system that is much more demand-led," she says. Shapiro advocates a much closer partnership between those institutions and businesses to make sure that graduates emerge with skills that employers need. But that can't be a static process in a technical environment bound to throw out new and unforeseeable challenges all the time. "You have to promote a lifelong willingness to keep learning," she says. "Unless you build that into the system, you're bound to never catch up."

Reform comes slowly, though, particularly to Germany, Europe's largest economy. Chancellor Gerhard Schröder has proposed issuing temporary work permits for 20,000 foreign IT workers to help fill the nation's estimated 150,000 open jobs in the sector. The proposal has brought to the fore an unlikely symbol for Germany's inflexibility — Jürgen Rüttgers, the so-called Minister for the Future in Helmut Kohl's last government. Just three years ago, he was quoted as saying that at his then age of 45, "I'm probably too old for a computer." Now Rüttgers is heading the ticket for the Christian Democrats in upcoming elections in the country's most populous region, North Rhine-Westphalia. His battle-cry — "Kinder statt Inder" (more children instead of more Indian IT immigrants) — has reaped scorn from both the left and the right as an unseemly manipulation of latent xenophobia.

But Rüttgers is hardly alone. With less incendiary rhetoric, the idea of importing labor is also opposed by Klaus Zwickel, head of IG Metall, Germany's largest labor union. He says the shortfall in the IT sector is an employers' scam to get cheaper foreign labor rather than fill open positions with some of the 31,840 unemployed who are registered as computer specialists. Industry representatives say only a fraction of the jobless thus categorized are suited to the open positions, and that foreigners would be paid just as much as Germans. But given the passions engendered by the modest prospect of the entry of 20,000 qualified immigrants, perhaps the real question is whether any non-E.U. programmer with another option would want to brave Germany's ambivalent attitudes and take up the offer.

There is in fact no cheap or quick way to enable the vast pool of jobless Europeans to retool themselves. Doris Neffe, 48, for instance, is one of 12 women enrolled in an intensive six-month IT secretarial course on the outskirts of the southern Belgian rust belt city of Charleroi, where unemployment is around 20%. "These days, not knowing how to use computers is like not knowing how to drive or use a phone," says Neffe. "I'm doing this because I want to be socially useful and independent." She and her fellow students are the lucky ones selected from a pool of 200 for the program, which is paid for by employers and unions of the metal industry. The course costs the organizers up to $8,000 per student, but the payoff is a 90% job placement rate in a region where many have given up.

As an older woman in a disadvantaged region, Neffe is an all-too-rare jobseeker culled from Europe's vast untapped labor resources. Europe not only has too many people without work; it also has too few seeking it. According to the European Commission, only 61% of European adults are employed, as opposed to 75% in the U.S. The difference is particularly great among women, only half of whom work in Europe; more than two-thirds do in the States.

Part of the problem is a legal one: only recently have France and Belgium, for instance, lifted 19th century restrictions on women working at night. But there are cultural barriers to clear as well, particularly in southern Europe and rural regions. More women work in countries where there are better public child-care facilities and more equitable wages; Europe needs more of both. "Getting more European women to work isn't just a question of fairness," says Barbara Helfferich, a member of Diamantopoulou's cabinet. "It's a question of being competitive in a globalized market."

Ireland's booming economy illustrates the point. Employment is up a resounding 32% since 1993, but more than 44,000 jobs are currently unfilled. The government's "Expanding the Workforce" program is aimed at getting more women into the workforce — a notable departure from a generation ago, when female civil servants were required to quit upon marriage. But getting women off "home duty" won't be enough to fill the bill. The government wants the "forgotten Irish" in places like Newfoundland to come back and fuel what is an economic transformation. In late May, a reconstruction of a 19th century Irish "famine" ship is scheduled to set sail across the Atlantic from Tralee on Ireland's west coast, en route to over 20 U.S. and Canadian ports. On board the replica of the Jeanie Johnston will be representatives from Ireland's training and employment authority.

Expanding the labor pool might help ease the shortage for strapped firms in the medium term, but it doesn't necessarily reduce the number of Europe's millions of long-term unemployed. In many European countries, there is scant incentive to seek work. In Belgium, for instance, a head of family who loses a longtime job can get up to $804 a month in unemployment, with no time limit. A typical low-wage job pays only $898 after taxes. MORE

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One price paid for relatively generous unemployment benefits in many E.U. countries is a high tax on labor, which in turn discourages hiring. Since the mid-1990s most E.U. countries have begun to reduce income taxes and social security contributions, the European Commission acknowledges, but it calls the overall results so far "modest." As Europe replaces its industrial workers with machinery and seeks to create more jobs in its underdeveloped service sector, levies on human capital could become even more of an impediment to job growth.

The nominally left-wing governments of the U.K., the Netherlands and Denmark have all dramatically decreased unemployment by increasing the incentive to work. The Danish government didn't slash generous unemployment benefits, but it did limit payment from nine years to four. It also launched an aggressive program of subsidizing jobs for young people and effectively forcing them to take them. "They succeeded in basically doing away with unemployment among those under 25," acknowledges Richard B. Larsen, director of the Confederation of Danish Industries. He says employers are less happy with the government's promotion of early retirement programs that put many older people off the unemployment rolls only by taking them out of the workforce.

In the U.K., younger unemployed are being similarly nudged into work by the government's "New Deal" program. Jobless under-24s get four months of intensive job counseling, which has to lead either to a subsidized private job, a public service job or entry into full-time training or education. Those who choose none of those options face getting their benefits cut off for up to six months, when the carousel begins again. The Government also gives low-wage families a substantial tax credit to increase the gap between work and the dole, and next year will be offering dole leavers a $160 one-time payment to offset start-up costs of entering employment. New Deal training provisions have helped Nagma Pathan, 24, get off unemployment and into her own business making handbags. "The scheme gave me a push in the right direction, and it gave me time to concentrate on what I wanted to do," she says. "But I think it only helps people to help themselves."

The Netherlands is in many respects Europe's model economy, with an official unemployment rate of 4% — the lowest in the E.U. except for Luxembourg. A booming economy has helped the country cut joblessness by more than half since the early 1990s. "We're working at capacity," says Joop Hartog, professor of economics at the University of Amsterdam. "We should be happy with that." An active labor policy bolsters the boom by offering tax credits for low-earners, more child-care and after-school facilities to ease women's path into employment, and more intensive mentoring — or hectoring — of unemployed to get them into the workforce.

But the Netherlands' impressive figures are misleading. Jobless over the age of 57.5 are not counted as unemployed, and neither are 911,000 Dutch people on disability benefits. The high number of disabled — more than three times the number of official unemployed — is such a stubborn feature of the economy that it has been termed the Dutch disease. In recent years the government has tried to bring the number down by essentially privatizing the process of assessing those on disability, tightening definitions of what constitutes a disability, and calling for more frequent medical checks. Yet the numbers continue to rise. "It's really puzzling why we can't stop this," says Hartog.

Reflecting the Netherlands' uniquely consensus-driven economy, unions acknowledge the need to broaden the labor pool. But Richard Gielen, a spokesman for the Dutch Federation of Trade Unions, says the problem isn't simply a matter of a reluctant workforce. "Employers have to do more to improve workplace conditions," he says. "Because of the lack of personnel, people work hard. The amount of work is the same, but there are fewer people to do it. So there's stress and burnout."

While unions throughout Europe still wield their power in traditional battles over plant closures and working hours, they have become more conciliatory in the new polity of the "Third Way." "The center of gravity has shifted," says David Foner, a researcher at the European Trade Union Institute in Brussels. "Because we have a seat at the table, there's a more solid consensus with our partners on how to address labor issues than there was 10 or 15 years ago." According to figures compiled by the International Labor Office in Geneva, more than 23 million working days were lost to strikes and lockouts in 1989 in the 15 current member states of the E.U., compared to less than 7 million in 1998.

That doesn't mean there aren't big differences between workers and employers. Spain's steep growth rate over the last few years has helped the recently re-elected conservative government of Prime Minister Jose Maria Aznar create more jobs since 1996 than in the rest of the E.U. combined. Though Aznar has enjoyed surprisingly good relations with Spain's labor unions, the two sides disagree on how best to continue chipping away at Spain's crippling unemployment rate of 15.2%, far and away the highest of the 15 member states. Employers are pushing to expand the growing ranks of workers on short-term contract and reduce the social security costs they bear when laying a worker off. The unions argue that such limited work contracts — covering two-thirds of Spain's teachers, health and construction workers — aren't a true fix for the country's 1.65 million unemployed.

That may be all that is in prospect, though, for many of Europe's jobless. Employers say such contracts are a natural consequence of the high social security payments, labor taxes and severance pay regulations associated with traditional jobs. In some labor-strapped sectors, the merry-go-round of what are derisively called junk contracts is slowing because qualified job-seekers are increasingly able to demand permanent posts. For the less qualified, though, market rules are still set by employers who want workers with a minimum of strings attached.

The eminent historian Jacques Barzun has suggested that there is a historical precedent for the kind of two-speed labor market wrought by the cyber revolution not just in Europe, but around the world. In the Dark Ages, the clerics in Europe's monasteries were the receptacles and conduits of arcane knowledge, then more theological than technological. Today, the cyber-literate keepers of the code are increasingly in a position to lord it over the masses who remain ignorant of the new web of knowledge that sets the course of economic development.

But unlike earlier benighted centuries, democratic governments today have the means — and increasingly the will — to bridge the gap between the elite and the disadvantaged. It is a task that has to be tackled quickly and with resolve, marshaling the untapped resources of educational institutions, private firms, and the army of Europe's unemployed. And on its success rides the question of whether Europe's next renaissance will be enjoyed by all of society — or will leave millions in the dust of the past.

With reporting by Lauren Comiteau/the Hague, Bruce Crumley/Paris, Helen Gibson and Jennie James/London, Ulla Plon/Copenhagen, Jane Walker/Madrid, Steve Zwick/Cologne and other bureaus