5 - A Multitude of Labour Markets

Summary

In the early years of European integration, there was a broad recognition of the need to integrate economies in a way that allowed policymakers to stabilize their home markets. As we saw in Chapter 4, this was done to ensure that market integration didn't drive labour conditions and wages downward in a competitive race to the bottom. Over the decades, this lesson has been lost on policymakers, as member states have jettisoned many of the tools necessary for local economic stabilization.

Today, European integration is animated by a belief that bigger markets are better than smaller ones; that integration propels harmonization; and that markets can be self-correcting. Policymakers and academics have come to believe that socioeconomic imbalances across Europe's various regions and countries can (and will) adjust automatically on their own accord. This belief lies implicitly behind the pursuit of a common currency and the need for standardized (read common) rules for member state fiscal, regulatory and procurement policies (among others). Such efforts have been justified by reference to the needs of a level playing field and with the promise of increased efficiencies. As a result of these pursuits, however, there is less room remaining for local policy autonomy at the member state level.

The problem is that European labour markets remain remarkably segregated and unique. The goal of this chapter is to describe that heterogeneity. The continued existence of a multitude of local labour markets – each following their own economic path – remains a significant challenge for Europe.

In the absence of unique policy instruments that can address these local challenges, such local economic asymmetries can prove very costly. If European labour markets actually behaved in a similar manner, and actually shared similar ambitions/hopes, then it would make sense to share a unified (single) policy regime (whether it was monetary, fiscal, regulatory, whatever). But this chapter demonstrates that this is absolutely not the case. Europe is not one common labour market, but hundreds – perhaps thousands – of small, unique and local labour markets, many of which are heading in very different directions.