The Carrot and the Stick: Employment, Unemployment and Labour Market Policies

In an era of recession and high rates of unemployment throughout Europe (see Table 2.1), all Southern European countries, and especially Spain and Greece, stand out as member states of the European Union who have serious labour market problems. Unemployment reached unprecedented heights in the 1980s and 1990s. Spain had the highest unemployment rate, hitting the 24 per cent mark in 1994. Greece, Italy and Portugal reached 7.3 per cent, 9.6 per cent and 12 per cent respectively in the mid-to late 1990s. The employment crisis confronting these countries since the 1980s is so serious that job creation was used in political campaigns for attracting votes. ‘Guaranteeing a future for our proud youth’ or ‘one million jobs’ were amongst the slogans heard during Papandreou’s and Berlusconi’s electoral campaigns in the early to mid-1980s and in 1994 respectively. This was done even though these countries found themselves in times of economic recession, with relatively large social security deficits and public debts.1 At the same time, during the 1980s and throughout the 1990s, we saw a move towards flexibilisation (numerical and functional); decline of employment regulations in terms of restrictions on the freedom of firms to use particular work practices; new forms of less secure work contracts replacing old traditions of paternalist and protective employment regulations; and the commitment to secure full-time employment.