Abstract
The burst of the housing market bubble in the USA in 2007 ignited a long-lasting worldwide economic crisis, now known as ‘the Great Recession’. For the first time since the Great Depression of the 1930s, financial markets played a key role both in generating and propagating the crisis across countries. Both the European Union (EU) and the USA were hit by the recession, although with differences. Differences may stem from different economic ‘institutions’—that is, differences in the set of rules and norms that govern the functioning of specific markets. Differences may also reflect different economic policy responses. The Great Recession was followed in 2011 by the sovereign debt crisis that hit debt-ridden countries and produced a widening gap between the core and the periphery countries of the Euro area (EA).
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
EU-15 includes Austria (AT), Belgium (BE), Denmark (DK), Finland (FI), France (FR), Germany (DE), Greece (EL), Ireland (IE), Italy (IT), Luxembourg (LU), the Netherlands (NL), Portugal (PT), Spain (ES), Sweden (SE) and the United Kingdom (UK).
- 2.
In this computation, the poverty line is ‘anchored’ at 50 % of the 2005 median income. See OECD (2014) for more details on changes in income inequalities during the crisis.
- 3.
The initial Phillips curve was a relationship between nominal wage growth and deviations of the unemployment rate from its normal value. The latter is assumed here to be the 2006 value. By using real unit labor cost changes rather than nominal wage changes, we also take into account the effects of productivity and of inflationary expectations changes.
- 4.
See, for instance, the summary of the available empirical evidence in Pissarides (2009). Wages are more sensitive to labour market conditions for job movers than for job stayers. The semi-elasticity of wages to unemployment (the percentage change in wages induced by a 1 % change in unemployment) is estimated at around 1–2 % for job stayers and around 2–3 % for job movers. But the estimates vary substantially across studies and countries. Font et al. (2015) obtain much lower figures (smaller than 1 %) for Spain. Gregg et al. (2014) find that the sensitivity of wages to unemployment in the UK has substantially increased after 2000, possibly as a result of changing labour market institutions.
- 5.
For more discussion on this theme, see, for instance, Mody (2015).
- 6.
- 7.
Besides its unfairness, an increase in income dispersion may have undesirable effects on macroeconomic performance. Kumhof et al. (2015), for instance, suggests that larger income inequality may increase the indebtedness of low- and middle-income households and contribute to the emergence of financial crises.
- 8.
We do not discuss the case of Eastern countries for which there are specific transition problems.
References
Andersen, T.M. 2012. A Flexicurity Labour Market in the Great Recession: The Case of Denmark. De Economist 160(2): 117–140.
Andersen, T.M., and M. Svarer. 2007. Flexicurity—Labour Market Performance in Denmark. CESifo Economic Studies 53(3): 389–429.
———. 2008. Flexicurity in Denmark. CESifo DICE Report, Special Issue on Flexicurity 6(4): 15–20.
Batyra, A., and H.R. Sneessens. 2010. Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance. Journal of Policy Modeling 32(4): 531–543.
Bentolila, S., and G. Bertola. 1990. Firing Costs and Labour Demand: How Bad is Eurosclerosis? The Review of Economic Studies 57(3): 381–402.
Bentolila, S., J.J. Dolado, and J.F. Jimeno. 2008. Two-tier employment protection reforms: The Spanish experience. CESifo DICE Report, Special Issue on Flexicurity 6(4): 49–56.
Blanchard, O.J., and A. Landier. 2002. The Perverse Effects of Partial Labour Market Reform: Fixed-Term Contracts in France. The Economic Journal 112: F214–F244.
Blanchard, O., and J. Tirole. 2008. The joint design of unemployment insurance and employment protection: A first pass. Journal of the European Economic Association 6(1): 45–77.
Blanchard, O.J., F. Jaumotte, and P. Loungani. 2013. Labor Market Policies and IMF Advice in Advanced Economies During the Great Recession. IMF Staff Discussion Note SDN/13/02.
Bovenberg, L., T. Wilthagen, and S. Bekker. 2008. Flexicurity: Lessons and Proposals from the Netherlands. CESifo DICE Report, Special Issue on Flexicurity 6(4): 9–14.
Calmfors, L., and J. Driffill. 1988. Bargaining Structure, Corporatism and Macroeconomic Performance. Economic Policy 3(6): 13–61.
Dustmann, Ch., B. Fitzenberger, U. Schönberg, and A. Spitz-Oener. 2014. From Sick Man of Europe to Economic Superstar: Germany’s Resurgent Economy. Journal of Economic Perspectives 28(1): 167–188.
Esser, I., T. Ferrarini, K. Nelson, J. Palme and O. Sjöberg. 2013. Unemployment Benefits in EU Member States. European Commission, Directorate-General for Employment, Social Affairs and Inclusion, July 2013.
EU. 2007. Towards Common Principles of Flexicurity: More and better jobs through flexibility and security. COM(2007)359 final, Communication from the Commission, 27 June 2007, Brussels.
———. 2011. Flexicurity. http://ec.europa.eu/social/main.jsp?catId=102, date accessed March 2015.
———. 2012. Evaluation of flexicurity 2007–2010: Final Report. Report by ICF GHK to the European Commission, Directorate-General Employment, Social Affairs and Equal Opportunities, October 2012.
Font, P., M. Izquierdo, and S. Puente. 2015. Real Wage Responsiveness to Unemployment in Spain: Asymmetries Along the Business Cycle. Banco de Espana: Documentos de Trabajo N° 1504.
Gregg, P., S.J. Machin, and M. Fernández‐Salgado. 2014. Real Wages and Unemployment in the Big Squeeze. The Economic Journal 124(576): 408–432.
Kumhof, M., R. Rancière, and P. Winant. 2015. Inequality, Leverage, and Crises. American Economic Review 105(3): 1217–1245.
Mody, A. 2015. Living (dangerously) without a fiscal union. Bruegel Working Paper 2015/03, Brussels.
OECD. 2006. Boosting Jobs and Incomes. Policy Lessons from Reassessing the OECD Jobs Strategy. Paris: OECD Publishing.
———. 2010. OECD Employment Outlook 2010: Moving Beyond the Jobs Crisis. Paris: OECD Publishing.
———. 2014. Income Inequality Update. Rising inequality: youth and poor fall further behind. Insights from the OECD Income Distribution Database. OECD, Directorate for Employment, Labour and Social Affairs, June 2014.
Orsini, K. 2014. Wage adjustment in Spain: slow, inefficient and unfair? Directorate-General for Economic and Financial Affairs, European Commission, ECFIN Country Focus, vol. 11(10).
Pissarides, C.A. 2009. The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer? Econometrica 77(5): 1339–1369.
Turrini, A., G. Koltay, F. Pierini, C. Goffard and A. Kiss. 2014. A Decade of Labour Market Reforms in the EU: Insights from the LABREF database. Directorate-General for Economic and Financial Affairs, European Commission, European Economy, Economic Papers 522.
Visser, J. 2013. Wage Bargaining Institutions—from crisis to crisis. Directorate-General for Economic and Financial Affairs, European Commission. European Economy, Economic Papers 488.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2016 The Author(s)
About this chapter
Cite this chapter
Sneessens, H. (2016). Growth and Welfare: Shifts in Labour Market Policies. In: Iglesias-Rodriguez, P., Triandafyllidou, A., Gropas, R. (eds) After the Financial Crisis. Palgrave Studies in European Political Sociology. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-50956-7_5
Download citation
DOI: https://doi.org/10.1057/978-1-137-50956-7_5
Published:
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-137-50954-3
Online ISBN: 978-1-137-50956-7
eBook Packages: Social SciencesSocial Sciences (R0)