Tuesday, 10 June 2014

After a debate on Europe

I took part in a debate on Europe with a Danish, a German and a Spaniard. The moderator was Portuguese (I am Italian). We agreed that many socio-economic issues can only be solved (internalized) at the European level. I wish to present support for an (obvious) point I made during the debate: the existence of necessary common european policies must not weaken the fact that member states have to design policies and structural changes that address specific national issues. Take for example the labor markets. Here I present two figures for the countries represented in the debate plus France (I needed a sixth country to make the figure more symmetric and there is really pas d' Europe sans la France). The data start in 1998 and end 2014. The first figure shows the ratio of total employment over population (age between 15 and 74 years old). The second figure shows the share of those same workers by educational level attained. Just a few short comments. Italy has the lowest share of employed population. The lower Italian participation reflects the larger shadow economy but not only: women and young participation rates are very low relative to European standards. Certainly this is an important margin for the Italian economy. Now look at Portugal: participation is high (it declined strongly because of the crisis) but the labor force is relatively little educated (although there has been improvement). Spain employment-population rate followed the real estate bubble (here causality is easier to deduce) but has also slowly shifted its employed population towards highly educated workers. Denmark, the land of happiness (in the words of the Portuguese moderator), has an outstanding participation rate but the crisis appeared to have hit severely the labor market. Participation in France is a flat-line. Germany's participation was at par with France until 2005, then something changed, and participation started to increase (by 7-8 pp!) inexorably. 
(click to enlarge)


  1. On the result of the elections (by a British conservative thinker...): "Europe against the european" http://www.forbes.com/sites/rogerscruton/2014/06/03/europe-against-the-european/

    1. On the other side of the equation, another sovereignty problem...

      Portuguese population is projected to decline from 10.5 million today to 8,6 million until 2060. In my opinion, this is a best case scenario that neglects many negative feedbacks of a chronically depressed economy. As we see elsewhere, once expectations of a chronically depressed economy set in, migratory outflows become a cultural phenomenon, one that will become as hard to manage as the Gothic migrations were, for the Western Romans.

  2. I will provide some context, to this Portuguese problem (of a poorly educated labor force. I hear that many public universities --- after the budget cuts of previous years --- have now huge liquidity problems. Following the decision of the Constitutional Court, some institutions are going to default on the payment of salaries to their own faculty.

    I conclude that as long as the creditors keep getting their dues on time, no one really cares about the sustainability of the Portuguese economy. The numbers (of uneducated labor force) speak for themselves, still the institutions that can do something about it are hampered by:

    1) liquidity problems;
    2) capital depreciation;
    3) human capital depletion (faculty is both shrinking and getting old).