Since the age of steam, the European labor movement has mustered red flags and brass bands on May Day for a traditional show of strength. But this year, post-May Day, Europe faces a labor paradox that Karl Marx never foresaw. While 15 million people are registered as unemployed in the 15-nation European Union, millions of jobs still go begging for lack of qualified applicants.
It's taken a while, but Europe's leaders have begun to recognize the need for labor reforms along lines familiar in the U.S. They have started to talk about promoting lifelong learning, lowering taxes on labor and increasing the gap between what a person gets on welfare vs. on the job. Indeed, Europe's overall fiscal health and strong growth prospects present a golden opportunity to launch those moves. But like all other opportunities, it may be fleeting. Says Romano Prodi, head of the European Commission, the regulatory arm of the E.U.: "We must act now, because the challenges facing us cannot wait."
Europe's job problem, most experts agree, is grounded in an inflexible education system, high payroll and social-security taxes and barriers to job-seeking mobility. The resulting 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," notes the E.U.'s employment commissioner Anna Diamantopoulou. According to the European Commission, only 61% of European adults are employed, vs. 75% in the U.S.
The difference is particularly great among European women, only half of whom work; more than two-thirds do in the U.S. Part of the problem is legal: France and Belgium, for instance, have just lifted 19th century restrictions on women working at night. But there are cultural barriers too, 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 top aide to Diamantopoulou. "It's a question of being competitive in a globalized market."
Even where things are great, they're not so good. The Netherlands in many respects is Europe's model economy, with an official unemployment rate of 4%--the lowest in the E.U. except for tiny Luxembourg, at 2.8%. Its boom helped the country cut joblessness more than 50% 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 work force. But jobless people over the age of 57 1/2 are not counted as unemployed; neither are 911,000 Dutch people on disability benefits. The high number of disabled--more than three times the number of officially unemployed--is such a stubborn feature of the economy that it's been called the Dutch disease. Tightening disability definitions and other measures haven't cured it.