According to Lyons, there are both demand and supply side reasons for low employment in Europe. There have been excessively tight policies over a long period. Even when these have been relaxed, unemployment has remained high because of the inflexibility of the labour markets. Regulations, excessive non-wage costs and a higher tax on labour compared with capital have all discouraged firms from recruiting new workers. The demand and supply side problems require demand and supply side solutions, but there is no reason to expect that they will be provided.
Worker rights are important but there is no balance within Europe.
So much so that Europe suffers from an insider-outsider problem. Europe has employment problems for young people, women, men in their late 50s and low skilled workers. These deep rooted problems more than offset concerns about America s low productivity and wage dispersion. There will be large regional disparities and pockets of high unemployment. Dr Lyons explained that the poor jobs performance in Europe is not about to be reversed.