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How the Unemployment Fiasco in Europe Is Kept out of Official Unemployment Rates

How the Unemployment Fiasco in Europe Is Kept out of Official Unemployment Rates

The massive and once-again extended Pandemic-era furlough programs serve their purpose, but…

In Europe, people who are furloughed are paid under government programs via their employers. Many of these programs have been created during the Pandemic. In theory, these people still have jobs. In practice, they’re not working, or are working heavily reduced hours. But they do not count as “unemployed” and are not reflected in the “unemployment” numbers. So throughout the Pandemic, the official unemployment rates barely ticked up, compared to the last crisis, and remain low for the EU era, despite tens of millions of people who’d stopped working due to the lockdowns (chart via Eurostat):

Under these furlough programs, the government pays companies, who in turn pay employees between 60% and 84% of their monthly wage. In some cases, the workers work fewer hours for less pay; in others, they don’t work at all. The workers take a hit to their income but their jobs remain intact, at least for the duration of the program.

The UK adopted a sweeping furlough program at the beginning of its last lockdown. Businesses can claim 80% of a staff member’s regular monthly salary, up to a maximum of £2,500. The money must be passed on to the employee and can also be topped up by the employer.

But the unemployment rate has begun to rise as people come off furlough, and those whose jobs disappeared entered official unemployment. The unemployment rate ticked up to 4.8% in the three months to September, from 4.5% in Q2 and from 3.9% a year earlier, according to the Office for National Statistics (ONS). In London, the unemployment rate surged by 1.2 percentage points from the previous quarter, to 6%, the largest quarterly increase in unemployment since the ONS started tracking the data in 1992.

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