Euro Area's Unemployment Tragedy Gives Push to Worker Mobility

The euro area’s stubbornly high unemployment rate might be masking a labor market that’s gradually started to become more dynamic.

Joblessness in the currency bloc has been almost continuously above 10 percent for more than six years, and data on Friday are predicted to show it extended that trend in February. Yet the headline figure encompasses wide national variations that may be providing a boost to labor mobility.

Case in point: Maria Cunha. The 22-year old Portuguese civil-engineering student is about to work abroad for the first time in her life. She sees her six-month stint as a waitress in a Cyprus hotel as a route to developing the soft skills such as English language and teamwork that she needs to improve her longer-term employment chances.

“Finding a job in my field is very difficult in Portugal,” Cunha said. “With this experience, I think it’ll be easier for me to move to another country.”

The euro-area jobless rate probably held at 10.3 percent last month, according to a Bloomberg survey of economists before the data is published by Eurostat at 11 a.m. in Luxembourg on Friday. With the exception of a brief dip to 9.9 percent in April 2011, it’s been at double-digit levels since September 2009.

Not so in Germany. Data due Thursday is forecast to show unemployment in the region’s largest economy held at a record-low 6.2 percent in March. That’s the rate using the country’s own methodology. Eurostat puts the figure at 4.3 percent in January.

At the same time, Portugal had a January rate of 12.2 percent and neighboring Spain was at 20.5 percent. Youth unemployment of more than 30 percent in some nations was called a “tragedy” this month by European Central Bank President Mario Draghi, who is pumping cash into the economy to try to revive growth and inflation.

While Draghi is struggling to succeed in his inflation push, the jobs market has been moving, if slowly. Euro-area unemployment has dropped from the record 12.1 percent reached in April 2013. A study published in January by Heiko Peters, an economist at Deutsche Bank AG, showed that mobility within the bloc was about 15 percent higher in 2013 than in pre-crisis 2007.

Germany is one of the destinations of choice. Even so, euro-area citizens headed there have for a long time faced competition from eastern Europe, and that’s not getting any easier with the region’s migrant crisis, which brought 1.1 million people into Germany in 2015 alone.

Immigrant workers from countries such as Italy and Spain “will find higher competition both for high-skilled and low-skilled jobs,” Peters said.

Peters notes that labor mobility is a “crucial criteria” of an optimum currency area as it allows the economy better to absorb shocks. The difficulty for the euro area is that, compared with more homogeneous economies such as the U.S., national differences are a high hurdle to overcome.

Besides a reluctance to leave family and friends, language is the biggest hurdle to relocation, according to a 2010 European Union survey. Despite the EU’s commitment to the free movement of labor, legal and administrative systems still prove a high bar, along with the difficulty in navigating an unfamiliar job and rental market, and the cultural divide.

Another possible distortion on the horizon is the U.K., which with laxer labor laws and English as the native language has proved a popular destination for workers. Should the nation opt in its June 23 referendum to leave the EU, that dynamic could change dramatically.

Taking the long view, Cunha’s attempt to broaden her international job prospects brought her to Movinhand, a Startup that’s trying to lower the barriers to labor mobility within Europe. Launched by two London-based Greeks, the company is focusing on English-language jobs in hospitality and healthcare, with a plan to expand into construction. The key focus -- and one which Draghi may cheer -- is on the young.

“It is easy for highly-skilled people to move from one country to the other,” said co-founder Andreas Marinopoulos. “Young people at the start of their career often lack the resources and connections to try their luck abroad.”

--With assistance from Kristian Siedenburg To contact the reporter on this story: Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net. To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Zoe Schneeweiss

By: Alessandro Speciale

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