The West European employment problem

The West European Employment Problem. -The most characteristic feature of the unemployment experience in Western Europe is the inability of the unemployment rate to return to pre-shock levels. In addition to rather restrictive demand management at various occasions, the main reasons for this persistence of unemployment are probably the long-term paths of real and relative wages, wide marginal tax wedges, disincentives to hiring and job search and possibly also an erosion of social norms against living off benefits. It is argued that a package of complementary policy reforms is necessary to overcome the unemployment persistence in Western Europe.