Counting unemployment in the EU: The real rate comes to anything between 16.1% and 20.6%

Marianne Thyssen, Member of the European Commission in charge of Employment, Social Affairs, Skills and Labour Mobility, gave a press conference on the 2014 Employment and Social Development in Europe Report, which looked back to the consequences of the recession. (EC Audiovisual Services, Brussels – EC/Berlaymont 15/01/2015).

Eurostat, the EU statistical service, repeated with more recent figures its memorable work on the real unemployment rate, that appeared for the first time in 2014 based on data for the third quarter of 2013. This time the Eurostat researchers worked with data for the last quarter of 2014. The new results they produced refer to part time workers who want to work more but don’t find employment, the persons seeking a job but are not immediately available for work and the persons available for work but not seeking.

Those new three categories of underemployed and unemployed persons must be added in the standard rates of unemployment. Eurostat states that “they constitute ‘halos’ around unemployment”, just because they are not included in the official definition of unemployment, as it has been defined by the UN’s International Labour Office.

Yet those people are as much unemployed as their other colleagues on the dole. Their situation is probably even worse, because by not being ‘officially’ unemployed they are deprived of any related social support, pecuniary or otherwise. Actually, their numbers are so big that one can easily conclude that the official definition of an unemployed person has deliberately excluded them.

Millions of underemployed

Back in January 2014 as soon as Eurostat published its first study on these additional forms of unemployment, this newspaper reacted and produced an article under the title “Eurostat: Real unemployment double than the official rate”. A much telling table was published and the readers reacted strongly to this hidden truth. There is more to it though. Eurostat, in its latest publication which appeared last Monday 27 April, reasserts that these other forms of unemployment are more growth-resistant. They didn’t seem to have been affected by the slight betterment of the situation in the labour market that occurred during 2014. There are many reasons for that. Let’s take one thing at a time.

EUROSTAT TABLE

The first and most important ‘soft’ unemployment form is the percentage of part-timers who want to work more but can’t find full employment. According to Eurostat “44.1 million persons in the European Union (EU) working part-time in 2014, 9.8 million were under-employed meaning they wished to work more hours and were available to do so”.

EUROSTAT GRAPH

In short, close to ten million workers are in reality looking for a full time job but they can’t find one. This is the equivalent of a medium sized EU country being underemployed. By any economic logic these persons are quasi unemployed and their numbers could be included in the overall unemployment rate. Now the same source informs us that those 9.8 million are equal to 4.5% of the working age population and logically have to be added to the formal unemployment rate which currently is 11.3%. That brings the unemployment/underemployment rate at 15.8%.

More jobless millions

Proceeding to the other two forms of soft unemployment, Eurostat informs us that there is an additional number of “11.6 million economically inactive persons aged 15-74 in the EU (who) had in 2014 a certain attachment to the labour market and could be considered as a potential additional labour force, equivalent to 4.8% of the EU labour force”. The largest by far part of those people belong to the category of those who are available for work but are not seeking. They are close to ten million. Eurostat tells us that most of those people are discouraged after unsuccessfully seeking employment for a long time and have come to believe that there is not a job for them. They have compromised by offering their services at home and are mainly women.

EUROSTAT TABLE

The other part of the soft unemployment form contains people who are seeking a job but are not available, for example “students looking for a job before graduation”. They are rather few numbering only 2.2 million in the entire EU. In total the aggregation of those last two forms of unemployment comes to 4.8% of the labour force.

Recalculating true unemployment

While the part-timers who want to work more are not really unemployed (4.5% of the total labour force in the EU) even under a broader definition of unemployment, the people who seek a job but are not available and those who are available but don’t seek (4.8%) unquestionably are truly unemployed. Eurostat calls this last percentage “potential additional labour force”, leaving to be understood that this is unemployment alright. Consequently, under any economic theory, total unemployment comes unquestionably to 11.3% + 4.8% = 16.1%. Then expanding the definition to include the part-timers who want to work more, the total comes to 16.1% + 4.5% = 20.6%. One may chose whatever definition one wishes but the truth remains that total unemployment is not just 11.3%.

Who suffer more

Last but not least there exist big differences between the core EU countries and the periphery, mainly in the south. Unsurprisingly the peripheral countries suffer more from those soft forms of unemployment. In Greece, Spain, Ireland and Cyprus the percentage of part-timers who want to work more (underemployed) constitute the largest part of the total labour force (6.8%, 9.1%, 6.7% and 9.3% respectively) amongst the EU member states. It’s quite alarming to observe that parts of the labour force, close to ten percent, being underemployed.

The same big differences between core and peripheral countries exist when examining the “potential additional labour force” (those seeking but not available {mainly women} plus those available but not seeking {mainly students}), who belong to the truly jobless part of the labour force. In this respect the ‘champions’ are Italy (13.6%), Croatia (9.6%), Bulgaria (7.6%) and Finland (7.4%).

All in all there is no doubt that real unemployment in the EU is a much bigger problem than the official rate discloses, and stretches to the region of 16.1% and 20.6%. And again the periphery suffers more.