On February 3, the Global Business and Economics Program hosted a roundtable discussion on creating jobs and restarting transatlantic economic growth with European Commissioner for Employment, Social Affairs, and Inclusion László Andor.
Commissioner Andor visited Washington at a crucial time, as Europe’s leaders have recently concluded their negotiations of a fiscal pact—and shifted the debate from fiscal austerity to stimulating inclusive economic growth. On a particularly good day for the US labor market—which saw the private sector add almost 250,000 jobs in January and the unemployment rate dip to 8.3 percent—Andor reminded us that there is much work left to do on both sides of the Atlantic. The discussion between the Commissioner, employment experts, and representatives of the private sector produced several important takeaways.
Today’s jobs crisis was exacerbated—not caused—by the financial crisis. While the crisis and Europe’s sovereign debt woes accelerated today’s unemployment levels, a variety of underlying factors are also to blame:
- Labor markets need to do a better job of matching employment supply and demand.
- Critical divergences in competitiveness between European member-states and various regions of the United States hamper growth.
- Language and cultural barriers restrict labor mobility, particularly in Europe.
We must close the skills gap to promote growth and social inclusivity. Despite millions of people ready and willing to work, companies face difficulties in finding people with the right skills and talents to fill open jobs. In order to close this skills gap, businesses, governments, and educators need to do a better job of collaborating to develop job-training programs that ensure that students finish school with the tools necessary to succeed. The initial transition from school to work can be difficult, and without better coordination between stakeholders, today’s record numbers of unemployed youth risk falling permanently behind. Barring significant progress in skills development, income inequality will continue to grow and unemployment risks becoming entrenched.
Europe faces a number of long-term challenges that threaten to undercut its future competitiveness. European politicians and electorates are beginning to recognize the full extent of the demographic challenge in front of them. Difficult reforms to the pension systems ensuring people work longer as life expectancies grow should be coupled with smart immigration reforms that encouraged skilled immigration. Otherwise, Europe’s vaunted social model may be at risk—due to a lack of sufficient workers whose taxes finance the system.
Still, there are reasons to be optimistic about the future prospects of both Europe and the United States. There are several signs that the global economy is on the cusp of a lasting recovery. Europe is turning the page on the crisis management phase of its response to its debt crisis—focusing instead on the urgent need for targeted investments in the future to promote job creation. The US job numbers suggest that the crisis of confidence that has inhibited investment over the past few years may finally be receding. Best practices from countries like Germany and Denmark demonstrate that high rates of labor participation can be coupled with high levels of social protection. Finally, the crisis has renewed calls from across the political spectrum to rethink the way governments handle unemployment and job training. The recession has been a powerful reminder that businesses, governments, and education systems all have important roles to play in preparing a highly-skilled workforce that can compete on a global scale.