

Building competitiveness

Insider aiding

Europe’s labour markets have favoured older workers at the expense of younger ones. The latest in an occasional series on structural reform

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Readers' comments



Allow me to dissent on the following:

"The easier it is for employers to fire, the quicker they are to hire.": Making dismissals cheaper is an incentive to dismissals, not to hiring.

"Laws like minimum wages foster unemployment because there will always be those who lack the necessary ability to earn money for their employers equal to or above the legislated minimum wage.": You're implying that employment status and waged income is a direct result of personal ability or productivity. This may be true in essays by Milton Friedman and in Conservative Party manifestos. However, reality -of which you claim to be a paladin- suggests that employment status and income obey to a more complex social dynamic whereby socioeconomic background plays an overriding role. Is it infrequent to see top Engineering graduates from, let's say, the University of Southampton being displaced by run-of-the-mill English Literature graduates from the University of St Andrews for a trading traineeship at an oil major? No, it isn't. How likely is for a less-than-stellar Etonian Oxbridge graduate in History to enjoy better access to a high-flying career in hedge fund management or investment banking than a top honours graduate in Statistics, Economics and Finance from UCL? Pretty much.

Merit and income, ability and responsibility, aptitude and opportunity - more often than not, all these relationships are at odds with reality.

Something that The Economist, unfortunately, fails to mention regarding Germany's employment success is the quality and inclusiveness of their education system. Germans are more productive mostly because they have enjoyed better training and education, and Germany's constitutional prohibition of economic segregation of students has made this possible by delivering access to quality education to all and, most importantly, by fostering a culture of meritocracy. If the ruling class of a country (i.e. the political and business elite) is compelled to use the same health and education services everyone else uses, not only that would deliver quality health care and education to all (e.g. Germany) but, in addition, it would cure or, at least, palliate that social disease called cronyism, so rampant in the UK.

Yes, legislation cannot trump reality. Legislation, for instance, cannot deliver equality of outcome; however, it can deliver something that resembles equality of opportunity. In any case, I believe that the socioeconomic success of countries like Germany, Sweden, Denmark and Norway cannot be attributed to one or two pieces of legislation. That would be reductionist, technocratic and dogmatic. Those socioeconomic successes can be understood properly if we do not fail to acknowledge the social democratic ethos that has underpinned the postwar social reforms implemented in those countries, reforms in which trade unions have played a very constructive role.

Alexis de Toqueville

Legislation does not, cannot, and never will, trump reality. The easier it is for employers to fire, the quicker they are to hire. Attempts at regulation merely hurt those who do not have jobs and benefit those who do, most particularly public employees. Laws like minimum wages foster unemployment because there will always be those who lack the necessary ability to earn money for their employers equal to or above the legislated minimum wage. Minimum wages and similar laws are purely populist, and as such do not seek the true benefit of those they appeal to.


"older workers luxuriate on permanent contracts".


sorry sirs, I have no other description than bull%hit for that.

I can understand you represent a readership that will enjoy larger incomes if they can mistreat workers, and so you may wish to present plain workers' right as something dangerous, but calling it "luxury" is well beyond offensiveness.

you don't want young people to have fair treatment, you want "old" people to be treatened unfair too, so nobody can complain someone is put better than himself and employers will have a much more malleable and economical and almost enslaved workforce.


For some reason the comments here are tending towards a tad of extremism. This isnt a socialist vs capitalist competion people.

As with any other industry, employment needs to be regulated but not too heavily (a good example would be legislation that creates industry standards and introduces minimum safety standards in products).

Too much regulation and safety netting will result in unproductive, lazy workers with high unemployment (eg US teachers, most of Spain etc).

Too little regulation results in discrimination and in extreme cases slavery or virtual slavery. I cant believe that the economist could ever vindicate the virtual slavery camps of Qatar for example. This is where say Nepalese immigrants slave away for 12-16 hours a day in 50 C heat for very little wages most of which goes to their visa sponsor. The lucky ones get one day off a week and sometimes avoid food poisoning. It makes Foxconn look like paradise.

Anyway a balance is needed and its definitely one tilted towards the US/UK model. The UK and states where the minimum wage exists are the best examples imo. Spain is definitely in need of labour reform.


Its not rocket science, Spanish, Portuguese, and Italian employers don't want to weighted down by cast iron long term employment contracts, so they have been employing cheap easy to fire short term contracts; mostly the young.

If the eurozone really wants to be come competitive, it must reform its maze of many different employment laws. many long term workers are treated as unfireable, and unsackable, while temp young workers are thrown out at a moments notice?


I am a foreigner ,I am learning English .About this passage ,I have a question, what does the subhead 'Insider aiding' means ?

lbo_it_rm in reply to jolyonwagg1

let me see: you say some people (the young) are treated unfairly.

well, let's treat unfair anybody else, so nobody will complain.

let's say someone's house is on fire, don't call the firemen, burn all the neighborhood.

nobody, not even the workers, benefit from jobs that can be given and taken at will.

employers want to fire people just because they have discovered that they can delocalize in far east countries and eventually they will be able to impoerish people in their nation so much that they will accept work conditions and wages similar to these countries.

enough with this silly hypocrisy of work flexibility.

why don't employers transfer themselves too in far east, where they can live a much more luxurious life with a lot less money than it's needed in Europe, and invest the rest in the company so they can continue to pay european wages?

Trickshot in reply to DominC

From my reading there is a problem of new jobs being offered on temporary contracts but there doesn't seem to be anything to suggest that older workers on permanent contracts retiring would lead to an increase in the offering of permanent contracts to new employees.

Agreed that the option of short term contracts is likely to create negative effects on the labour market, I'm probably mostly against the title which seems to suggest older workers are the problem as opposed to labour market laws and regulations.

what you call reality I simply call greed.

slavery was a reality in civilized countries some 100 years ago. so was 14 hours per day labour shift and minor labour. then, you know, something called civilization intervened.

people like you won't bother to call the police in front of a bank robbery because, hey, it's reality: robbers have guns.

DominC in reply to Trickshot

I agree the problem is not older workers per se. It is the labour laws that overprotect existing contracts, which are generally hold by older workers. These laws, if too restrictive, may prevent employers from switching to more productive workers, or make them avoid hiring altogether.

It's a bit like wedding without the possibility of divorce, or the divorce procedure would be so cumbersome and onerous, that you prefer to stay single just in case that things would go bad!


It is the impact of labor market rigidities on productivity that will, over time, drive countries (and their workers) to the wall. It is inescapable. Permanent workers will be able to protect themselves for only so long. See Greece.


if I can give a friendly suggestion to spanish, portuguese as well as italian youths:

- *first* obtain full worker "luxuries" for you,

- only *after* you obtained that, then look at your parents' life call for a reduction of the "luxuries" for their generation, if you really think it's the case.

otherwise your justified anger against those who misdirect our nations' economies will be used to impoverish an already poor "old" generation, and stay sure you will obtain nothing.

and you won't even have someone who could offer you a room to sleep or some food to eat between a temp job at 600 euro/month and another.


What is not being recognized is the future tax base for these nations. An unproductive and untrained youth work force will only create a generation of poor earners and essentially lowering these conservative nations' future tax base. By redistributing taxes in the way of career training in future and developing economic sectors will ensure the future of these nations prosperity. Development of renewable resources, healthcare careers all have human resources needs that need to be met for future expansion. Capital investments now will develop and create prosperity in short term and in the future. Without it, the west as whole will see a short-fall of opportunity and tax revenue, which will also be compounded by the retiring baby boom generation, which these policies seem to be serving.

heart of flint in reply to lych031

Insider aiding = legal protections for people who already have permanent jobs. For example it is very difficult to fire an "insider." It is a problem because it prevents "outsiders" who don't have a permanent job from competing for that job. Also it means companies do not want to create any new permanent employees because it is a heavy burden for the company.

In other words, protections for a certain group of workers are a barrier to others

DominC in reply to Trickshot

The Lump of Labour may be a fallacy when applied in the strictest sense, in a certain period of time. In different situations, as in this one, it may well have a relevant effect.

Think that, if 50% of the available employment is "reserved", even if such situation creates incentive to the creation of new jobs, there will be much more volatility in the positions that remain "open" to competition


Extremely gratifying to see the Economist finally tackling a 'real' issue, which affects millions of youngsters in Spain and Portugal.
In both countries the rigidity of labour laws, combined with increasing life expenctancy has led to this situation where the young live in absolute precariousness.
In both countries labour law changes are being implemented but this may take years before it takes on full effect.
In both countries, the solution has been emigration. Most in Portugal are going to Angola, and Brazil, and Mozambique, where they find good opportunity.
It should be noted that this is a completely different emigration from the one the country had in the 60s, we are talking about skilled workers, who are often actually very much in need in the countries that receive them.
There has been a series of articles about this in the Portuguese press.
Some are trying to create their own companies and become self-employed... some cases of extreme success ... but often these companies need credit to get going - and banks are deleveraging and ergo not lending...

Malopolanin in reply to Super-pedrolx2

Mozambique? Is it that bad in Portugal? Jesus Maria, are you inventing things? Why would someone move to Mozambique, if he wasn't Mozambiquan?
If I was Porteguese, I would search for new markets for olive oil, fish and wine. People may laugh at this but you can earn big money on export of natural products. I (in Poland) know of a farmer who exports apples to Germany from his 4 hectare orchards and earns a profit of about 300.000 EURO a year.


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