UNEMPLOYMENT.

Unemployment occurs when an individual wants work but is unable to find it. It can be traumatic for the individual and other family members involved but is also a necessary part of the mature, modern economy. It is common for workers to move from job to job and many will experience (short) periods of unemployment. But when unemployment rises above this essential and unavoidable core, there emerge overlapping social, political, and economic problems that have bedeviled European economics and politics since World War I.

THE EXTENT OF UNEMPLOYMENT

In practice unemployment is defined and measured by administrative systems that vary between countries. During the twentieth century European countries strengthened and broadened these systems, which makes it difficult to produce data that are comparable over time and between countries. Nevertheless, scholars such as the economist Angus Maddison and international bodies such as the International Labor Office have attempted to produce standardized unemployment rates. Although the figures in table 1 are generally accepted, economists Barry Eichengreen and T. J. Hatton have argued that they are probably underestimates for the interwar years. The national averages for standard historical periods in table 1 are complemented by figure 1, which shows unemployment in the big three European economies. From these two sources, there appear to be two separate effects and four different periods: two phases of relatively high unemployment (1920–1938 and 1979–2005 and after) surrounding the lower levels in the long postwar boom (1950–1973) and the transition phase (1973–1979), with cycles of high and low unemployment within each of these subperiods but especially in the first and last subperiods.

Unemployment was very low during World War I but soared during the international recession of 1920–1922, which hit Britain exceptionally hard. In the world slump of 1929–1932, European unemployment rates again rose dramatically, though France (for which there is very incomplete data) escaped the worst effects until 1933–1934. Historians agree that the slump was caused by a combination of the plunge of the U.S. economy after the Wall Street crash, instability in international finance, and plummeting prices for food and raw materials, though they disagree profoundly on their relative importance, and the slump's impact in each country depended upon the relative exposure to each. The worst-hit countries were the United Kingdom, which was heavily dependent on world trade and payments, and Germany and Austria, which were disrupted by the withdrawal of U.S. loans from Europe as U.S. share prices surged and collapsed in 1928–1929. The falling prices of major foodstuffs were especially damaging in Central and Eastern Europe, notably Yugoslavia, Romania, Bulgaria, Hungary, and Poland, where between one-half and three-quarters of the total

population was dependent upon agricultural systems that were inefficient and badly organized. In the worst cases, agricultural product prices halved, hitting farms that had already gone heavily into debt, reducing spending and depressing the rest of these economies.

Unemployment was generally low in Western Europe during the 1940s as a result of wartime and then reconstruction demands, though Germany experienced high unemployment after 1945 as its fate was discussed among the victorious powers. Although European postwar recovery was aided by U.S. financial assistance (Marshall Plan) the dynamic of reconstruction and renewed growth drove the Western European economy (and, indeed, the Soviet bloc) to historically low unemployment rates. Low unemployment was all the more impressive in the light of significant migration into Western Europe and the widespread growth of paid employment for married women. The boom eventually burst in 1973 amid the massive oil-price rises associated with OPEC 1. The 1970s saw slowly rising unemployment, rising inflation, and intense social conflict over the direction of economic policy and marked a transition to the disturbed conditions of the late twentieth century. Since 1980 Europe has again suffered from the effects of international instability in finance and trade but has also been forced to make major technological changes to cope with rising energy costs and competition from lower-wage economies such as China, Brazil, and Mexico. The wealthier European economies have confronted these pressures with differing degrees of success but almost invariably have seen contraction of the number of jobs in manufacturing and relative expansion of the service sector. The availability of standardized unemployment statistics for peripheral Western European economies (since the early 1980s) and comparable data on the transition economies of the former Soviet bloc (for the 1990s) in table 2 should also be noted. Clearly unemployment in these countries has generally been higher than in Western Europe but their experiences have been very mixed.

VARIATIONS IN UNEMPLOYMENT

The labor market is turbulent, with new workers joining (from school, university, or the household), older workers leaving (to pensions or family support), and some losing jobs while others find new employment. While any worker can experience unemployment, some groups are hit harder than others. Because the main slumps of 1920–1922, 1929–1932, 1979–1982, and 1991–1994 had their origins in the international economy, those parts of the economy (mainly manufacturing and agriculture) that depend on exports or compete with imports suffered highest unemployment. In the depression of 1929–1932, Britain experienced problems in shipbuilding, iron and steel, and textiles in addition to the longer-run problems of coal mining, while the German economy collapsed so spectacularly (full-time employment fell from 20 million in mid-1929 to 11.4 million in January 1933) that unemployment was spread comparatively evenly around the economy. In the recessions of the 1980s and 1990s, there were such substantial falls of manufacturing employment across Western Europe that commentators began to speak of "deindustrialization."

Vulnerability to unemployment has tended to vary with the worker's level of skills; managers are more secure than skilled manual workers who in turn are more secure than the unskilled. When older workers become unemployed it is often more difficult to find work, and unemployment is relatively high among workers over age fifty. Younger workers have also experienced problems. In interwar Britain, for example, those between ages fourteen (the school-leaving age) and twenty-one (when adult wages were paid) received low pay and experienced relatively low unemployment. But when unemployment rose in the 1970s and 1980s, younger workers were among the first to be displaced, and Britain, France, Italy, and Spain had high youth unemployment rates in the 1980s and 1990s.

In all countries, and throughout the period since 1914, female rates of unemployment have been lower than male. This reflects social convention whereby women have been expected to withdraw from paid labor to perform domestic duties. Furthermore, until the 1950s, women were supposed to work only until marriage. Indeed, in many countries welfare systems were organized around this assumption. Cultural attitudes reinforced these patterns; many married men regarded paid employment for their wives as a failure of their role as family protector and breadwinner. These attitudes began to change, however, as, led by the Scandinavian welfare economies, employment patterns shifted from "masculine" manufacturing to expansion of feminized work in the service sector (always allowing for the existence of feminized work in manufacturing and male jobs in the service sector), and full employment put more general pressure on the labor market. Nevertheless, even in the early twenty-first century, many married women losing their jobs continue to return to domestic duties rather than registering as unemployed and seeking new paid employment.

The other major variation in vulnerability to unemployment concerns ethnic group. For a

variety of reasons French unemployment between the wars was less severe than in Germany and the United Kingdom, and the French managed to accommodate to the problem by restricting the entry into the country of foreign workers. As a result, Poles, Italians, Belgians, and Czechs bore the brunt of redundancies and the burdens of unemployment. Similar influences have operated since 1980. In Germany the Gastarbeiter ("guest" workers, i.e., immigrants) experienced higher rates of unemployment than Germans; the same was true of North Africans in France and Afro-Caribbeans and Asians in the United Kingdom. Ethnicity compounds other problems; in the early 1990s rates of unemployment among North African youths in France were well above the national average, as were rates among black youths in the United Kingdom.

UNEMPLOYMENT POLICIES

Into the late nineteenth century the unemployed were regarded as feckless inadequates who should be treated by "relief" that was demeaning to the recipient and often separated the frequently unemployed "residuum" of society from the respectable majority. This harshness began to soften with a growing understanding of the regular pattern of booms and slumps and political pressure from trade unions and workers' parties. As a result, the wealthier and more progressive countries developed unemployment insurance to tide the unemployed over cyclical slumps. Some governments, notably the United Kingdom, extended unemployment insurance between 1914 and the mid-1920s under further pressure from organized labor, so that unemployment insurance covered much of the manual workforce.

The rapid rise in European unemployment in 1929–1932 resulted in lower tax revenues and increased public expenditures to support the unemployed. National budgets went into deficit and governments defaulted on international loans. They sought salvation in economic nationalism, limiting the convertibility of domestic currency into gold and foreign exchange and restricting imports, hoping to stimulate domestic employment. But this was not enough; European politics was gripped by crisis as unemployment rose rapidly in 1931–1932. In agricultural Eastern Europe, widespread rural distress forced governments to introduce emergency measures. Everywhere the unemployed protested and demanded support from governments, best summed up by the demand of the British Trades Union Congress for "work or maintenance." Simultaneously, employers demanded wage cuts and an end to public protests.

In Germany, rising unemployment forced the Heinrich Brüning and Franz von Papen governments into increasingly experimental "work creation," which had little impact on unemployment levels. The inability of democratic governments to cope drove opposition groups to the streets. The Nazis campaigned vigorously for more dynamic work creation and their electoral popularity increased. When they seized power in 1933, the Nazis used the full muscle of the state to generate recovery, insulating Germany from the world economy through elaborate controls over foreign exchange and trade. A massive program of public works, especially in building and road construction, and a comprehensive planning system helped unemployment fall rapidly (figure 1) and increased the government's popularity. From 1934 the central focus of Nazi planning switched to rearmament, though historians disagree on precisely which parts of public expenditure can be classified in this way. The Nazi government achieved the most spectacular reduction of unemployment in Europe in the 1930s but at the cost of a militaristic, dictatorial system that ruthlessly persecuted opponents and followed increasingly risky foreign policies.

In Britain, liberal democratic institutions remained in place despite widespread dissatisfaction with continuing mass unemployment. There were major policy changes, however, with withdrawal from the international financial system (the gold standard) and international free trade. The British political system emerged virtually unscathed from the mass unemployment of the 1930s despite marches of the unemployed and constant pressure in Parliament, thanks to the regional concentration of unemployment away from the prosperous Midlands and southeast and the early signs of recovery (late 1932), which was well sustained until 1937. Sweden combined innovative policies within a stable constitutional framework and established the foundations of the "Swedish model." Popular dissatisfaction over the pace of recovery brought a change of government in 1934, with the Social Democrats dominating a new coalition. The new government introduced loan-financed public works to accelerate recovery, as proposed by Swedish unions and Stockholm economists. This "deficit-financed" public works program subsequently received prominence as the first example of Keynesian policies in a democratic country.

The authority of Keynesian economics rose during World War II; John Maynard Keynes and his followers occupied key posts in British economic policy making, and Britain's wartime economic stability was widely noted by governments-in-exile. It now seemed possible for European governments to promise postwar "full employment" and a "welfare state" for the unemployed, the sick, and the old as long as trade unions pledged not to exploit full employment with big pay demands. This package seemed highly successful, with unemployment very low across Europe during the long boom (table 1, figure 1). It is now generally agreed, however, that the special conditions in the European economy (high investment, rapidly growing intra-European trade) were more important than economic policy in securing full employment. The commitment to Keynesian policies was tested for the first time in the 1970s, but against a background of rising prices (inflation) rather than the falling prices (deflation) that Keynes had imagined, and with very mixed results. In general, growth slowed and unemployment rose simultaneously with inflation, creating a new problem, "stagflation" (as identified by Michael Bruno and Jeffrey D. Sachs).

The most interesting response to stagflation was the further development of the Swedish model. Trade unions allowed managers to determine enterprise staffing levels and technologies of production and settled wages nationally at levels that would keep Swedish industry competitive, but they relied on governments to give generous benefits and retraining to displaced workers. Although formally described as the "Swedish" model, variants were found in all the small, open economies of Western Europe. This approach coped well with rising unemployment in the 1970s and early 1980s but came under increasing strain in country after country as wage pressures mounted and the cost of supporting and retraining displaced workers grew. Britain negotiated the 1970s with some difficulty, suffering seesawing inflation and rising unemployment. The apparent ineffectiveness of traditional Keynesian policies helped to win the 1979 general election for Margaret Thatcher, who promised to concentrate on reducing inflation rather than unemployment and cut state intervention. Her government blamed rising unemployment in the 1970s on increasing trade union power, which they attacked with a range of policies. Under Thatcherism unemployment remained very high throughout the 1980s, falling only in 1987–1989, when inflation began to rise once more. The Thatcher experiment is much studied and remains very controversial, but its analysis of British unemployment now seems limited.

Perhaps the most interesting response to rising unemployment was President François Mitterrand's experiment of 1981–1983 in France. Under the presidency of Valéry Giscard d'Estaing, French policy against stagflation concentrated on inflation reduction, allowing French unemployment to quadruple between 1974 and 1981 amid growing industrial problems. The resulting popular discontent contributed to the election in 1981 of a socialist government under Mitterrand, committed to Keynesian increases in public expenditure and radical industrial policies to reduce unemployment and modernize industry. However, unemployment continued to rise, inflation accelerated, and the French balance of payments deteriorated. After 1983 the focus of policy switched back to curbing inflation, and French unemployment has remained high. French governments, like their German counterparts, reacted to union pressures by granting employment protection and subsidies to industries in competitive difficulty. In an increasingly powerful analysis, based on the work of the U.S. economist Mancur Olson, both Germany and France are seen as examples of "Eurosclerosis," condemned by inflexible labor markets to persistent unemployment and "jobless growth," though this analysis is questioned in both France and Germany. Thus, in policy making, solving unemployment has involved calculating the impact of strategy on the price level, the balance of payments, the level of government spending, and the strength of the currency. The heady optimism of the 1960s that the unemployment problem had been banished can now be seen to have been misplaced.

SOCIAL CONSEQUENCES
OF UNEMPLOYMENT

Poverty was the most obvious consequence of unemployment in both the 1930s and 1990s. The jobless tended to be manual workers with few assets upon which to draw when redundancy struck. In the 1930s unemployment tended to hit male breadwinners with unfortunate consequences for family incomes. Benefits were paid to the unemployed in both periods, but in the 1930s they were well below even modest subsistence levels. In all countries insurance benefits lasted for a finite period, followed by various forms of less generous "dole." The fascinating study by Marie Jahoda and others of unemployment in the Austrian village of Marienthal in the early 1930s found that four-fifths of unemployed families had allotment gardens for vegetables. Diets were dull and boring, and nutritionists found poor standards of health in areas where unemployment was highest. A British survey of the 1930s found that one in three of the wives of the unemployed they visited was in poor health; the needs of husbands and children took priority at mealtimes. Where life was so bleak small luxuries helped to sustain morale, and George Orwell's Road to Wigan Pier (1937) illustrated the need for something "tasty" to brighten dreary lives. Interwar investigators also found complex links between unemployment and ill health. When recessions hit, employers tended to lay off their least productive workers first, and in general there were advantages to the unemployed in receiving sickness or disability rather than unemployment benefits. All countries experienced public demonstrations from the unemployed. These could often be violent, as in Germany during the early 1930s as rival political factions sought control of the streets. But political violence was worst in the early 1930s in those states that had been subject to the "victors' peace" at Versailles and where governing institutions had limited legitimacy.

Similar trends are evident in the 1980s and 1990s. All European countries have seen rising levels of poverty despite the growth of employment among married women since the 1950s. Social scientists have reaffirmed the impact of unemployment on mental and physical health, but the most interesting contrasts concern the impact on social stability. Europe was shaken in the late 1980s and early 1990s by a series of violent demonstrations against unemployment, often by ethnic groups who experienced high unemployment and limited concern from the political establishment over their plight. Many European governments have become concerned that the disaffection among these groups in the decaying industrial centers or on the fringes of major conurbations has provided a seedbed for Islamic fundamentalism.

In the 1930s the most common response from the unemployed was apathy. Governments bought social peace for the majority by benefit entitlements. When industrial depression was regionally concentrated, communities could "settle down" to "life on the dole" as unemployment became the norm and families struggled to cope in much-reduced circumstances. Of the five hundred families in Marienthal, more than four hundred had neither income from nor prospects of work. The vast majority of what little money these families commanded was spent on food, and the struggle for daily existence bred apathy. Orwell found similar conditions in the depressed coalfields of northern England. But the contrasts should not be exaggerated. Despite the growth of employment for married women after 1950, the vast bulk of Europe's unemployed since the 1980s have also faced drastically reduced lives and have coped by adapting to the reality of their conditions. In absolute terms, poverty is less intense and widespread than it was in the 1930s, but the unemployed remain on the fringes of European social and political life.

See alsoDepression; Inflation; Labor Movements; Strikes; Trade Unions.

BIBLIOGRAPHY

Bruno, Michael, and Jeffrey D. Sachs. Economics of Worldwide Stagflation. Cambridge, Mass., 1985.

Eichengreen, Barry, and T. J. Hatton, eds. Interwar Unemployment in International Perspective. Dordrecht, Netherlands, 1988.

Jahoda, Marie, Paul F. Lazarsfeld, and Hans Zeisel. Marienthal: The Sociography of an Unemployed Community. New York, 1971. Translation of the original 1933 German edition.

Maddison, Angus. Dynamic Forces in Capitalist Development: A Long-Run Comparative View. Oxford, U.K., 1991.

Olson, Mancur. "The Varieties of Eurosclerosis: the Rise and Decline of Nations since 1982." In Economic Growth in Europe since 1945, edited by Nicholas Crafts and Gianni Toniolo, 73–94. Cambridge, U.K., 1996.

Orwell, George. The Road to Wigan Pier. London, 1937.

Alan Booth