Europe: the crisis marches on in the unemployment data. And that’s not all: flex jobs and freelance jobs are the nasty flipside of unemployment.

Yesterday was the day that the United States Bureau of Labor Services (www.bls.gov) presented the unemployment data for February, 2013. The US unemployment data have been showing a slow, but steady and enduring decline over the last year. Unemployment dropped to 7.7% from 8.3% in February 2012: a sigificant drop of 0.6% Y-o-Y.

Although not all signs have yet turned to green for the United States, it seems that the most difficult period of the crisis lies finally behind them. Now, the recovery process can gain momentum.

What a difference with the European unemployment situation. Last week, on Friday, 1 March 2013, the European unemployment data were presented by Eurostat. The data didn’t look good at all.

The average unemployment for the EU-27 (i.e. all countries of the European Union) increased to 10.8% from 10.7% M-o-M and the Euro-zone unemployment increased to 11.9% from 11.8% M-o-M.

Year on year, the increase for the EU-27 was 0.7% (from 10.1% in February, 2012) and the increase in the Euro-zone was even 1.1% (from 10.8% in February, 2012). Here are a few snippets from the official Eurostat press release:

Eurostat estimates that 26.217 million men and women in the EU27, of whom 18.998 million were in the euro area,were unemployed in January 2013. Compared with December 2012, the number of persons unemployed increased by 222 000 in the EU27 and by 201 000 in the euro area. Compared with January 2012, unemployment rose by 1.890 million in the EU27 and by 1.909 million in the euro area.

Among the Member States, the lowest unemployment rates were recorded in Austria (4.9%), Germany and Luxembourg (both 5.3%) and the Netherlands (6.0%), and the highest in Greece (27.0% in November 2012), Spain (26.2%) and Portugal (17.6%).

Compared with a year ago, the unemployment rate increased in nineteen Member States, fell in seven and remained stable in Denmark. The largest decreases were observed in Estonia (11.1% to 9.9% between December 2011 and December 2012), Latvia (15.5% to 14.4% between the fourth quarters of 2011 and 2012), Romania (7.4% to 6.6%) and the United Kingdom (8.3% to 7.7% between November 2011 and November 2012).

The highest increases were registered in Greece (20.8% to 27.0% between November 2011 and November 2012), Cyprus (9.9% to 14.7%), Portugal (14.7% to 17.6%) and Spain (23.6% to 26.2%).

Where some countries in Eastern Europe seem to do a fine job in reducing unemployment, the situation in the PIIGS-countries and Cyprus deteriorates… quickly. 

Foremost as a consequence of the disastrous and disgraceful absence of economic countermeasures against economic deterioration and soaring unemployment, but on top of that spurred by the harsh austerity measures that have been deployed within these countries, under pressure of the EU. 

These economic countermeasures should have been taken, in order to give people and companies within the PIIGS-countries some new perspective. Now that this didn't happen, due to misplaced frugality from the leaders of the European Council, the unemployment is just soaring within the PIIGS.

Most consumers in the PIIGS-countries abolished buying anything else, besides the necessary provisions and durables that they can’t live without. When you leave out tourism as a source of export income, the export in the PIIGS (except for Italy and Ireland) is fighting a losing battle against the giants of exports, Germany and The Netherlands.

Even the Italian exports – historically a cash cow for this important industrial and service-oriented nation – have been showing anemic growth over the last twenty years: growth that probably even vapourizes, when it would be corrected for inflation.

Italian exports from 1992 - 2011
Data courtesy of Eurostat
Click to enlarge

And last, but not least: also industrial and agricultural behemots like The Netherlands and France are far from immune for rising unemployment. While Dutch unemployment is still very low on a European scale, it rose considerably over the last 12 months.

Here is a chart that I made upon the European unemployment data:

European Unemployment Data
Data courtesy of Eurostat
Click to enlarge

Where the unemployment for all age categories is already very high in a lot of European countries, the real graveness of the situation becomes clear when you look at the youth unemployment. There are a large number of countries within the European Union where youth unemployment is (much) more than double the rate of normal unemployment: Luxemburg, Croatia, Spain, Greece (no recent data available) and many, many others are on this worrisome list.

If not something dramatic happens on the labour markets, the unemployed European youth could easily turn into a lost generation in the next ten years. 

Unfortunately, this is where the European Union and especially the European Council let their younger citizens down in a very pitiful way. The utterly foolish focus of the EU on healthy balance sheets and budget deficits below 3% of GDP, distracts the politicians from the silent disaster that is taking place before our very eyes. The only words that I can state about this political narrow-mindedness are: shame on them!

And yet, there is more.

In The Netherlands and probably in many other countries in the European Union, there is a dangerous shift going on from people having steady jobs towards people that have flex-jobs and freelance contracts.

While these flex-jobs and freelance contracts generally work out fine for the (large) employers, it is a looming disaster for the (especially younger) workers.

The Dutch ZZP-workers (i.e. ‘independents without personnel’ or freelancers) are people that generally work in the ICT-industry, the financial services industry, the transport & distribution industry and Building & Construction (B&C).

They left their fixed job – sometimes under pressure from their employer – for an uncertain future as freelancer, often even without changing their employer and workplace. These freelance ZZP-workers often maintain doing exactly the same job, but instead of earning a fixed, monthly salary, they send their ‘employers-gone-principal’ a monthly invoice for their efforts.

In times when there are ample jobs and large building projects at every corner of the street, in combination with an unfulfilled demand for qualified workers, this is not necessarily a bad development. People can ask satisfactory hourly fees, negotiate good contract-conditions and have an excellent chance to build up a decent capital ‘for a rainy day’. However, currently those times are a million miles away.

Many ZZP-workers (especially in B&C, Transport and the ICT-industry) hear the heavy breathing from tens of thousands of workers from the East-European and Oriental low-wage countries, like Poland, Romania, Bulgaria and India. People that will do the same job for a fraction of the hourly rate that Dutch workers require.

When it is not possible for employers to pay these lower wages in a legal fashion, due to collective labour agreements (CAO’s) and minimum wage-constraints in their industry, some companies do this even illegally, by evading the CAO-agreements and minimum wage through opaque business-constructions.

The result is that domestic and foreign workers from the low-wage countries are both entangled in a race-to-the-bottom for tariffs and income. This race leaves especially the domestic workers in an awkward financial position, with an income that is too little to structurally live from with a family in The Netherlands. Companies, which often suffer from an awkward financial situation themselves, can not help, but doing this in order to survive.

When these freelance workers run out of a job eventually, they neither have a right to unemployment benefits, nor are their reserves sufficient to live from for a number of months. Poverty looms in such a situation.

Another worrisome category of workers in The Netherlands (and probably beyond) are the flex-workers.

In the past, workers either immediately received a fixed working-contract from their employers, or they did so after working for (mostly) one year under a flex-contract. The latter was a widely accepted way to find out whether workers had it in them or not, for companies who thought that the two month legal probation period would be too short.

However, a few years ago, the possibilities for employers were extended to offer flex-contract upon flex-contract to their workers. Although a company officially must offer a fixed job-contract to an employee after maximally three years of flex contracts, there are numerous ways to evade this policy: for instance by hiring someone with a ZZP-contract.

The worst method that companies sometimes use to keep their workers at flex-contracts, is firing a worker at the end of the flex-period and hiring him back after a few months, in order to start a new series of three years in flex-contracts. 

While the Dutch central government and parliament officially cry shame upon these methods, they often look the other way when it comes to real action in order to stop this policy. Members of Parliament ask the obligatory questions and the government gives the obligatory answers; further little changes.

I put two charts together that are showing the consequences of the flexible labour force. These charts show the increase of flex-workers and ZZP-workers, versus the decrease of fixed-contract workers.

The first chart deals with workers from 25-65 years and the second chart with youngsters. Both charts are based on data supplied by the Dutch Central Bureau of Statistics (www.cbs.nl). Please mind that some data must be counted against the right axis:

Workforce with fixed contracts vs flex-workers and freelancers
Data courtesy of www.cbs.nl
Click to enlarge

Workforce of youngsters with fixed contracts
vs. flex-workers and freelancers
Data courtesy of www.cbs.nl
Click to enlarge

Especially the youngsters get in an increasingly awkward situation: the number of youngsters with a flex-contract is currently higher than the number of youngsters with a fixed contract.

The consequences of this development towards flex-labour in The Netherlands could be serious when the Dutch economy further deteriorates in the coming years: youth unemployment is currently already almost twice as high as unemployment over the whole age spectrum. 

On top of that, this flexible shell of workers, who now still have a job, can be ditched quite easily when economic circumstances require this or when cheaper workers come around that do the same job for a fraction of the price.

I wouldn’t be surprised when this development is taking place everywhere in western and southern Europe (hence: the ‘old’ EU). This could lead to a new wave of poverty in The Netherlands and the other European countries in the not-so-distant future.