Differences in working culture and government responses have created a sharp divide. Which way will the UK go?
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It is one of the most famous charts of the coronavirus crisis: a simple bar chart in The New York Times showing unemployment claims soaring to levels that can barely be contained on the front page. In the United States, the unemployment rate jumped from 3.6 per cent in April 2019 to 14.7 per cent a year later. But in European countries — even those hard hit by the virus — it has nudged rather than broken the dial.
In Germany, for example, the unemployment rate in April was 3.5 per cent, up from 3.1 per cent in April last year. France saw a year-on-year bump of 0.2 percentage points in April; Spain was up by 0.6 points.
Overall, unemployment in the EU and the eurozone are both lower in April 2020 than they were in April 2019. Both have registered only a small uptick from March to April this year.
The chart below shows just how sharp the divide between the United States and the European Union has become. US unemployment rate overshoots that of the EU
This divide may be getting even larger. While the figures for May — and later months — will likely show rising unemployment in Europe, the US may see a faster rise. Goldman Sachs estimates that the American unemployment rate will peak at 25 per cent in the second quarter of the year.
The numbers reveal just how differently the US and Europe approach employment. Two different models
European countries generally make it much more difficult to fire workers compared to the US, which experts believe makes the entire system more protected from crises such as the Covid-19 pandemic.
“Germany and Denmark have fended off a rise of unemployment by subsidising firms to furlough their employees — so that the employees could go on receiving their paychecks while waiting out the pandemic at home,” explains Edmund Phelps, the winner of the 2006 Nobel Prize in Economics and Director of the Center on Capitalism and Society at Columbia University.
“In contrast, France and Spain, which have not adopted that method, have experienced a sharp rise of unemployment.
