Question

can you help with question 2a

2). The average unemployment rate in western Europe is higher than in the United States. (4 points) a). Explain one difference between the European and U.S. economies that is consistent with more structural unemployment in Europe. b). Explain one difference between the European and U.S. economies that is consistent with more frictional unemployment in Europe. A typical worker Covered by unemployment insurance in 8 receives 50% of her Former wages For 26 week. In many Bean Countries, unemployment - insurance programs are gnificantly more generous. The unemployments in Europe are less pres rch for new employment and are more likely to turn down 1. tractive Job offers. Both of these be haviors reduce the rate of

Answer 1

2a)

Unemployment in several European nations has escalated sharply due to the credit crunch & worldwide economic slump. After falling to 7.5 per cent in 2008, the prolonged economic downturn of 2008-13, has caused a sharp augmentation in unemployment. The continent appears to be stuck in a deflationary spiral & is encountering a persistent double-dip recession. Worst hit debtor nations, like Greece, Spain,& Italy are experiencing stringent budgetary cutbacks – that are discouraging demand. However, in the Eurozone, there’s little relief available to foster demand. Nations are not being able to devalue. Monetary strategy developed by the ECB has been unwavering in targeting low inflation & providing little monetary slackening –even with the persistent recession. Also, dampened demand throughout the area is making it tough to grow thru increasing exports.

European officials have always given the impression they’re more worried about the bond markets & low rate of inflation than the more pressing issue of unemployment. There’s been a reluctance to tackle the basic deficiency of overall demand which is leading to low growth & diminishing employment. Attempts to lessen unemployment have focused on talk of more flexibility of the labour markets. This may be a component of the solution for structural unemployment, but enhancing labour market flexibility by itself can’t deal with the cyclical unemployment.

Structural unemployment-

As well as the present demand deficit unemployment (cyclical unemployment), European economies have struggled with unrelenting structural unemployment for the last 2 decades. Reasons for high natural rates of unemployment are-

• Inflexibility in the labour markets
• Liberal unemployment benefits that cause frictional unemployment.
• Geographical immobility
• Stringent labour market regulations which dissuade corporations from taking on new labour.