Marianne Thyssen, Member of the European Commission in charge of Employment, Social Affairs, Skills and Labour Mobility, receives the BeNeLux Trade Union representatives to discuss the Labour Mobility Package. The Commissioner seems rather stressed seeing the slogan the trade unionist are proposing: “STOP SOCIAL DUMPING”. (EC Audiovisual Services. Date: 24/06/2015).
Statistical data for the Eurozone economy paint a rather misty picture. Labour costs, an indicator which can fairly describe the evolution of the total volume of wages, marks a distinct increase signaling a clear betterment of the situation of the working classes. On top of that, May inflation at 0.3% indicates that the rate of change of consumer prices has left behind the dangerous negative-zero region.
At the same time though the evolution of the employment level (rate of change) seems to fall short for a too long a period of time, remaining well below the pre-crisis levels (end 2007-beginning 2008). The overall number of people in salaried occupation in Eurozone has been practically stagnating or marking insignificant variations for years, signaling an also unyielding unemployment rate.
By the same token, industrial production follows the same evolution pattern as employment, for obvious reasons. The real volume of production of this key sector of the economy during the July 2009 – July 2011 period recuperated some ground in relation to the disastrous fall of the January 2008 – April 2009 crisis. In this rather brief period industrial production lost almost one quarter of its real volume. Taking the year 2010 as the reference volume level (2010=100), industrial production in Europe fell from 115 in January 2008 to just 90 in April 2009. Then it recovered at 104 in July 2011 and since then it remains near but below this last level. Let’s take one thing at a time.
What is more important?
Last week Eurostat, the European statistical service announced that “Hourly labour costs rose by 2.2% in the euro area (EA19) and by 2.5% in the EU28 in the first quarter of 2015, compared with the same quarter of the previous year”. Given that in both the euro area and the EU28 the institutional environment in the labour market remained rather unchanged for years, the increment of the hourly labour costs indicates a similar rise in labour remuneration.
Undoubtedly this is good news for the European workers. All along this time period (2014-2015) consumer prices remained unchanged or even fell. As a result, labour costs growth must have supported a similar or higher rise in take home pay. However, this 2.2%-2.5% increase in workers’ incomes was not translated into increased consumption. An obvious explanation is that most households refrained from increasing their consumption expenditure due to persisting uncertainty.
Lack of confidence
This lack of confidence for the future can be attributed to two reasons. For one thing, nobody is convinced that the root causes of the devastating 2008-2009 financial crisis have been effectively confronted. Probably the opposite is true. The monetary authorities (central banks) in both sides of the Atlantic Ocean continue to print and distribute trillions of euros and dollars, steadily feeding the US and European banks with zero cost liquidity. Nobody knows where these new immense supplies of cash end up. We are informed that the derivatives markets may be in the region of hundreds of trillions, at least ten times the world GDP.
There are more sources of inquietude though related to the developing world debt bubble, the major geopolitical risks all over the globe and of course the Greek enigma. Any of those dark spots may trigger a catastrophic financial and otherwise crisis. People may not know the details of those dangers but deep in their minds they feel that a new financial Armageddon may be triggered at any moment.
Uncertain future
The second and equally important reason which prevents the households from expanding their spending is stagnating employment. Eurostat informed us that “The number of persons employed increased by 0.1% in the euro area (EA19) and by 0.3% in the EU28 in the first quarter of 2015 compared with the previous quarter“. Everybody understands that an increase of employment by one or three decimal points of a percentage unit means nothing good. There is more to it though.
In many Eurozone countries like Greece, Spain, Italy, France, Portugal and Cyprus unemployment is always skyrocketing. Not to say anything about the EU members states in the central and eastern parts of the Old Continent. Add to that the dreadful rates of youths without occupation, apprenticeship or training and the overall picture of the European economy becomes not misty but full of uncertainty and threats for the average worker, fearing that he or she may lose their job at any time. As noted above, similar negative messages are also coming from the statistics about the volume of industrial production.
Unquestionably then, despite the few positive statistics which appear at times about the EU economy, the truth remains that Europe’s working and unemployed millions are always uncertain or even desperate about their future.
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