Unexpected sharp rise in unemployment

The unemployment rate in Austria, which had slightly decreased during the first half of 2001, unexpectedly increased by 8.4% in July compared with the same period in 2000. While forecasts had predicted a fall in the average annual unemployment rate to 3.6% in 2001, the rate seems likely to display an upward trend due to the restrictive budget policy of the current government as well as weak economic growth. Men have been more affected than women by the rising unemployment. Trade unions and the political opposition have called for a change in government policy, while increasing unemployment in the tourism industry has raised the issue of the number of foreign workers in this sector.

As recently as early summer 2001, forecasts predicted a fall in Austria's average annual unemployment rate by 0.1 percentage points to 3.6% in 2001(using the EU definition). However, this prediction has turned out to underestimate the impact on current labour market developments of the government's restrictive budgetary policy and a slowdown in economic growth. Although the summer months are traditionally characterised by employment peaks, mainly due to increases in construction activity and tourism, it is just these branches that are now suffering from rising unemployment. Meanwhile, economists have revised their forecasts: where they previously predicted the number of unemployed people to remain close to 190,000 in 2001, they now expect annual average unemployment to reach at least 200,000 under current economic and political conditions.

Unexpected rise in unemployment

The first half of 2001 saw continuous employment growth (an increase of 0.6% in the current labour force), resulting in a total of 3,120,600 employees. While women benefited from this upswing, men were affected negatively and their average employment rate fell by 0.5% due to the already weakening labour demand in the construction industry, the transport and telecommunications sector, the public administration and education services.

In July 2001, the number of registered unemployed people unexpectedly climbed to 164,366, which was 12,705, or 8.4%, more than in July 2000 – see the table below. As the construction industry, along with hotels and restaurants (tourism), mainly accounted for the slackening labour demand, men have once again been severely hit by the rise in unemployment, while women have been less affected.

Registered unemployment in July 2001

. . July 2001 Difference compared with July 2000 Total in %
Total 164,366 12,705 8.4%
Males 83,546 8,589 11.5%
Females 80,820 4,116 5.4%
Selected branches: . . .
Industrial production 31,215 1,110 3.7%
Construction industry 21,264 2,968 16.2%
Commerce, maintenance and repair 33,306 1,419 4.5%
Hotels and restaurants 19,812 1,829 10.2%

Source: Public Employment Service (Arbeitsmarktservice, AMS).

While this unemployment growth has involved virtually all branches, the construction industry and tourism have been hit specifically hard by the deceleration of economic growth. Housing construction has come to a virtual standstill and demand for civil engineering is extremely poor, mainly due to restrictions on public spending. In July 2001, the unemployment rate in the construction industry had risen by 16.2% and in the hotels and restaurants sector by 10.2%, compared with the same period one year previously. Ewald Walterskirchen of the Austrian Institute for Economic Research (Wirtschaftsforschungsinstitut, WIFO), points out that 'according to empirical studies, economic growth has at least to reach an average annual rate of 1.75% in order to maintain the prevailing unemployment rate. Since GDP growth rates in the euro area will fall to 1.4% in the third quarter, after having been.5 % in the first and 2% in the second quarter of the year 2001, unemployment seems likely to increase further.'

Government policy under criticism

Employees' organisations and the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) have heavily criticised the current government's policy as being responsible for the sharp increase in unemployment. However, the coalition government of the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ) and the conservative People's Party (Österreichische Volkspartei, ÖVP) rejects this criticism and attributes the rise in unemployment to declining economic growth. 'Total employment has risen by 20,000 compared with July 2000 and will increase further,' stated the general secretary of the ÖVP, Maria Rauch-Kallat.

However, critics are calling on the government to stimulate economic growth through 'anti-cyclical' demand management and active labour market policies. Furthermore, the Trade Union for Hotels, Restaurants and Personal Services (Gewerkschaft Hotel, Gastgewerbe, persönlicher Dienst, HGPD) claims that the government is responsible for the rise in unemployment in tourism, as it has allowed for the recruitment of more foreign workers in Austria during the summer season. Unimpressed by trade union protests, Martin Bartenstein, the minister of economic and labour affairs, increased the immigration quota from 1,200 employees granted a seasonal work permit in 2000 to 6,000 in 2001, a rise of 500%. Notably, the Tyrol region, which had strongly lobbied for an increase in the number of seasonal workers from abroad, now has to tackle the problem of a 21% rise in unemployment.

Commentary

The political disputes over recent labour market developments in Austria give an idea of the whole array of conflicts which are accelerating in connection with EU enlargement to the east. In comparison with the position of business, the trade unions argue for a more cautious, gradual opening of the labour market, geared to a decline in the real wage differentials between Austria and the applicant Member States in eastern Europe. However, in the medium term, both the employees' side and the representatives of organised business virtually agree that demographic developments (fewer younger and more older people) will lead to a large drop in the labour force between 2004 and 2010, which has to be made up by the use of foreign employees. (Susanne Pernicka, University of Vienna)

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