Lord Layard on the cause of long-term unemployment
November 24th, 2009 Posted in Economics, UK Politics, US Politics by Tom Papworth
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.
November 24th, 2009 at 11:59 pm
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.
November 25th, 2009 at 1:29 pm
It’s a shame he didn’t impress this upon his acolytes during their 12 years in power.
November 29th, 2009 at 3:57 pm
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.
November 29th, 2009 at 4:32 pm
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?
November 30th, 2009 at 11:44 am
A direct quote without interpretation cannot be called honestly be called “misrepresentation”, Paul.
November 30th, 2009 at 8:25 pm
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?
December 1st, 2009 at 11:35 am
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.
December 1st, 2009 at 4:36 pm
Sounds good to me.