Europeans Spend More to Help the Unemployed : Work: Many countries are killing the jobless with kindness. Sweden has a model retraining program.
It has been more than two years since 36-year-old Ferdi Rutenfrans lost his last paying job, cataloguing books at the Amsterdam public library.
“I wasn’t exactly fired,” he said. But he didn’t exactly quit either. He chafed under what he calls the library’s “hierarchical” organization. “I had words with my employer,” and the next thing he knew he had joined the sizable ranks of the Dutch unemployed.
Rutenfrans still collects unemployment compensation of about $600 a month--enough, when combined with the equivalent salary earned by his girlfriend as a free-lance translator, to keep a roof over his head. If he had lost his job in the United States, by contrast, his unemployment benefits would have stopped after six months.
“I guess if I lived in America,” he said with a shudder, “I’d have to sleep in the streets.”
Europe, as Rutenfrans found out the hard way, has dug far deeper into its pockets than the United States to assist its jobless.
With jobs in the United States growing harder to find every day, Congress enacted legislation last month permitting as much as 20 extra weeks of unemployment benefits after the first 26. But even in the high-unemployment states that qualify for the full 46 weeks, benefits will expire earlier than those in all but a handful of Western European countries.
And the size of the monthly benefit check in the United States falls short of the typical European allowance. Of the 17 Western European countries in the Organization for Economic Cooperation and Development, all but Greece, Portugal and Switzerland spend more of their wealth to support their unemployed than does the United States.
Yet the price for Europe is measured in more than French francs, German marks and Dutch guilders. Much of Europe is only now discovering that a substantial segment of its population would rather collect a benefits check than earn a paycheck.
“Young people tell me, ‘Why should I come to work for you when I can make as much staying at home?’ ” said Knut Lehner, a director in the Brussels headquarters of Ziegler, Europe’s largest international shipping company.
Much of Europe is killing its unemployed with kindness. The unemployment rate in the 12 European Community nations is about 9%, compared with 6.8% in the United States, even though most EC economies are substantially more robust.
More than that, joblessness in Europe tends to become a way of life. Before the 1990 recession, only 10% of unemployed Americans had been out of work more than six months. The figure was higher everywhere in Europe--from 18% in Sweden to an astonishing 87% in Belgium, which pays unemployment benefits indefinitely.
Researchers at the Free University of Brussels cite the case of an Italian man who came to Brussels as an embassy chauffeur and, after losing that job, collected unemployment benefits for 15 years while turning down offers to become a taxi driver or a truck driver.
“The unconditional payment of benefits for an indefinite period is clearly a major cause of high European unemployment,” concluded a recent study by British economists Richard Layard, Stephen Nickell and Richard Jackman.
However, hardly anyone in Europe advocates following the example of the United States, which is niggardly not only in its financial support but also in its efforts to find jobs for the jobless. U.S. job training and “workfare” programs, unlike those in Europe, focus on welfare recipients--mostly single mothers--rather than the larger jobless population.
“The harshness of the U.S. labor market has its casualties. . . ,” say Jackman and John Philpott, director of Britain’s Employment Institute. “We do not want a U.S.-style underclass.”
Rather, more and more countries are trying to find work for the out-of-work. Their model is Sweden, which spends more money per capita on retraining its unemployed than on educating its university students. Its jobless rate--at its highest level since World War II--was still only 2.9% in October.
One who was pulled back from the abyss is Leif Hedin, who had to leave his former job selling equipment for trucks when his eyes went bad in 1984. After 18 months out of work, he was enrolled in a government computer-programming course, and his training led him three years ago to an administrative job with a construction firm in the town of Sigtuna, about 20 miles north of Stockholm.
The government reimbursed the company for 90% of Hedin’s salary initially and still pays 50%. Hedin’s take-home pay is about $1,700 a month, more than his jobless benefits had been.
“The work is more than just the money,” said Hedin, who is single. “It’s a social experience.”
Here in the Netherlands, where the population has grown so elderly that more people are retiring from the work force than are entering it, a law scheduled to take effect on Jan. 1 will require young people through age 20 to work if they are not still in school.
Those who cannot find jobs of their own will have to work for the minimum wage--roughly equal to the unemployment benefit--in hospitals, retirement homes or government offices. For one or two days a week, they will be trained for positions in the real job market. The mandatory work age will continue to rise by one year every year until 1998, when everyone through age 26 will be required to work.
The chief reason the Dutch parliament imposed the job requirement is simple: money.
“What we’ve been doing costs a lot,” said Dick Weeda, information director for the Amsterdam social services office. Relative to its size, the Netherlands spends nearly four times as much for unemployment compensation as does the United States, even though its unemployment rate is about the same.
Theo van den Berg, Amsterdam manager for the temporary-employment agency Randstad, said the Dutch law also reflects a new way of thinking that is taking hold throughout Europe.
“Up until a couple of years ago,” he said, “it was not acceptable to require people to work. Now it is becoming so.”
About 850 of Amsterdam’s jobless--not quite 2% of the city’s 45,000 unemployed persons--have already been put to work in sundry jobs, from collecting tickets on city trams to acting as security guards during soccer matches.
Cok Oostveen is one of these. Oostveen, 47, lost his job as a sports director for problem youth five years ago when an infected heel sidelined him. He collected disability payments for a year and then unemployment benefits of about $575 a month.
Finally he went back to work Nov. 1 as an administrator of a soccer league in tough Amsterdam neighborhoods. His pay--about $900 a month--still comes from the government.
“I always had the attitude that you don’t just sit around, you get out and do something,” he said. “The trouble with most unemployed people is that they just sit around and wait for something to come to them.”
Dutch officials worry that they will run out of useful work for people such as Oostveen, particularly as the mandatory work age rises to 26. They hope that public-service jobs will launch the unemployed into the private sector.
Jan Bosman, who edits a free monthly newspaper in Amsterdam for recipients of social services, scoffs at this notion. “The intention is that with this experience, these people will be able to find other work,” Bosman said. “It’s just not true.”
The 60-year-old Bosman, who is too old to qualify for any of the back-to-work programs himself, said the only beneficiaries will be private employers--they will be able to find minimum-wage workers to do nasty jobs that people would otherwise be unlikely to accept.
For now, the Netherlands is planning to place the unemployed only in jobs for the government and the non-profit sector. Sweden and other European countries, seeking to move these people into the private sector, have generally found it necessary to lure would-be employers with generous subsidies.
Sometimes the exercise boomerangs. Gaelle t’Serstevens recently felt the backlash of Belgium’s whopping tax breaks to companies that hire the unemployed.
A few weeks ago the young Belgian woman, who had worked for three years as a marketing assistant at a U.S. firm (she asked that its name not be used), was abruptly laid off to make way for an unemployed person. “The official reason for departure written on my breach of contract was ‘restructurization,’ ” she said.
In fact, she said, she learned from friends that the company’s tax breaks for hiring an unemployed person substantially exceeded the three months of severance pay that the company paid her. With t’Serstevens now jobless, Belgium’s long unemployment rolls are no shorter than before.
Denmark, where unemployment benefits expire after 2 1/2 years, tries to rotate people in and out of some public-sector jobs so that no one is out of work for long. That may be fine for the jobless, but it is not always satisfactory for the employer.
Rita Madsen, the principal of a nursery school for children aged 2 to 6 in the town of Svennenge, said only seven of her 10 teachers are permanent members of the staff. The other three, with little or no training for their jobs, came in off the jobless rolls and will leave after seven to nine months to make way for others like themselves.
“I don’t think this is a good thing,” Madsen said. “We want them to stay longer. They have to leave just when they are settling into their jobs.”
Although only Belgians can get unemployment benefits indefinitely, the unemployed in Denmark and many other European countries qualify automatically for welfare programs when jobless benefits run out. Especially in Northern Europe, the concept of a guaranteed income is alive and well.
Only 34% of jobless Americans received government support in 1986--above only Italy among the 11 countries for which British economists Layard, Nickell and Jackman could find data. By contrast, Sweden helped 86% of its unemployed, and Belgium, 85%. A study by the European Community shows that Spain, Portugal and Greece, the EC’s poorest members, also fell below the U.S. level in 1989.
Are generous and indefinite benefits themselves a cause of joblessness? Probably, although the experts disagree on the degree.
“You cannot say that people are staying on the dole just for the pleasure of it,” said Ralf Jacob, an economist with the European Community in Brussels. Unemployment has remained stubbornly high in many European countries despite a massive growth in the number of jobs since the mid-1980s. The major reason, said Adinda Vanheerswynghels, a researcher at the Free University of Brussels: Women and others have flocked into the work force as opportunities have opened.
However, she concedes, “there are some people who abuse the system, people who no longer look for work.”
David Grubb, an economist with the OECD in Paris, argues that it is “simplistic” to blame high benefits for high jobless levels. Local economic conditions matter more, he said, although he agrees that “there is a small number of people in some countries who live continuously on welfare with no intention of getting a job.”
Michael Emerson, a European Commission economist who now represents the EC in Moscow, believes that the number is not so small. “Most countries in Europe (are) paying extremely large sums from public budgets to people who could work but do not,” Emerson wrote in 1986.
Jackman, an economist at the London School of Economics, said most of the unemployed do not look seriously for work as long as they can get along without it. “They’d rather be unemployed than take the available jobs,” he said.
In 1989, according to Britain’s Employment Institute, Britain denied jobless benefits to only 35% of the 16,000 people who either refused job offers or chose not to seek out available jobs. Its unemployment rate was 7.1% that year.
Sweden, by contrast, automatically denies four weeks of benefits to anyone who refuses a job that matches “the person’s background and suitability for the work.” Its unemployment rate has been less than 3% for 45 years.
“The obvious lesson is that unconditional benefits must be of limited duration,” say Layard, Nickell and Jackman. “But then, what after they run out? One approach is nothing, as in the U.S.A. This is a harsh route, in which some people end up on the scrap heap.”
They recommend the Swedish approach: generous jobless benefits of limited duration, combined with a gargantuan effort to put people back to work. Much of the rest of Europe has a long way to go.
The pressure to work has not, for example, permeated Amsterdam’s unemployment benefits network. Frank Fisscher, 27, is scraping by on about $650 a month in jobless benefits while he attends school to learn to become a photographer.
“There’s no pressure on me to get a job,” he said recently as he left the downtown unemployment office.
At the same office, 29-year-old “Alex"--he withheld his real name--explained that he had just received a substantial bank loan to begin an expensive airline pilot training course. His limited work experience--seven months as a technician for a university heating system--did not qualify him for jobless benefits.
“But,” he said with a smile, “there are ways to get something from the system.”
Where the Jobless Fare Well
Jobless benefits in selected European countries and United States.
Spending on Benefit jobless benefits level at Duration Jobless Country and programs* outset** of benefits rate Belgium 3.92% 60% Indefinite 7.9% Britain 1.49 26 52 weeks 10.1 Denmark 5.83 64 130 weeks 8.7 Germany 2.18 58 52 weeks 4.5 Netherlands 3.34 70 154 weeks 6.6 Sweden 2.25 90 60 weeks 2.9 Switzerland 0.30 70 50 weeks 1.1 United States 0.85 50 26 weeks*** 6.8
* Percentage of gross national product
** Percentage of income previously earned, for worker with dependent spouse
*** Recently augmented by up to 20 more weeks in some cases
Source: Organization for Economic Cooperation and Development