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Lord Layard on the cause of long-term unemployment

November 24th, 2009 Posted in Economics, UK Politics, US Politics by

Here is Labour peer and happiness economist Lord Layard on the cause of long-term unemployment in Europe:

Europe has a notorious unemployment problem. But if you break down unemployment into short-term (under a year) and long-term, you find that short-term unemployment is almost the same in Europe as in the U.S. – around 4% of the workforce. But in Europe there are another 4% who have been out of work for over a year, compared with almost none in the United States. The most obvious explanation for this is that in the U.S. unemployment benefits run out after 6 months, while in most of Europe they continue for many years or indefinitely.

Hat tip to the Tim Worstall at the Adam Smith Institute.

8 Responses to “Lord Layard on the cause of long-term unemployment”

  1. tim leunig Says:

    He has been saying this for about 25 years – read the Layard, Nickell and Jackman textbook, Unemployment, published c. 1984! And yes, he is right.

    Note that this also applies within the UK. Wales is (significantly) poorer than Britain, and the reason is primarily differences in long term dislocation of working age people, particularly men, from the labour market.


  2. Tom Papworth Says:

    It’s a shame he didn’t impress this upon his acolytes during their 12 years in power.


  3. Paul Pettinger Says:

    Are you advocating cutting unemployment benefits?? Why have you only quoted the paragraph above from the paper about US benefits being cut equalling less unemployment?

    The article actually argues that proactive welfare to work measures are required to tackle to unemployment, not less government support.


  4. Paul Pettinger Says:

    Also, Lord Layard’s paper is called ‘Welfare-to-Work and the New Deal’, not ‘The cause of long-term unemplyment in Europe’. Why are you misrepresenting what he has written?


  5. Tom Papworth Says:

    A direct quote without interpretation cannot be called honestly be called “misrepresentation”, Paul.


  6. Paul Pettinger Says:

    Except that Lord Layard argues proactive welfare to work measures are required to tackle to long-term unemployment, not less government support. Do you advocate cutting unemployment benefits?


  7. Tom Papworth Says:

    Paul,

    It is possible to agree with somebody’s diagnosis but not their prescription.

    However, I actually think that well targetted interventions can do wonders for getting people back to work. The Australians have had a remarkable success with privatising the Unemployment Service. Rather than pay staff to sign people on, they pay agencies to find them work. The agencies get little or no money for registering unemployed people, or for those who remain unemployed, but get paid for getting them into work, and get bonuses if they are still in work after a decent interval (I think increasing bonuses kick in after 3, 6 and 12 months). The result is that the companies have a huge incentive to find sustainable employment for their clients, rather than the current cycle of jobs and benefits (see Frank Field’s work on the revolving New Deal door).

    It doesn’t all have to be slash-and-burn, you know. Policy just has to work with the grain of human behaviour, rather than against it.


  8. Paul Pettinger Says:

    Sounds good to me.


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