National job stereotypes need updating

THE RICH world’s labour market is on a roll. In the past three years the average unemployment rate in the OECD, a club of mostly wealthy countries, has repeatedly hit historical lows. The employment rate of working-age people is at an all-time high (see chart 1). Not bad in a world of tariffs, geopolitical uncertainty and the threat to jobs from artificial intelligence. Behind the strong aggregate performance lies even more remarkable change. Long-standing stereotypes are melting away.

Over time many countries have turned from high-unemployment basket cases into job machines. For decades joblessness in Ireland was notoriously high, prompting people to move to Britain, and then America, in search of work. These days, however, all three countries’ unemployment rates are about the same. By contrast, Chile was once known as a haven of low unemployment. But by the late 2010s, as jobless rates elsewhere fell, its rate came to be among the highest in the OECD.

More recently the smashing of job-market stereotypes has gone into overdrive. In recent decades Australia’s unemployment rate has been, on average, half a percentage point higher than New Zealand’s. Today its rate is a percentage point lower, as Kiwis deal with the bursting of a massive housing bubble. In the late 2010s Costa Rica struggled to get unemployment below 10%. Now it is 5.8%. In recent months Canada’s jobless rate has risen alarmingly, even as America’s has been steady.

Nowhere has undergone a more remarkable transformation than southern Europe. At the peak of the euro crisis, in 2012-13, the average unemployment rate across Portugal, Italy, Greece and Spain neared 20%. Pundits dubbed the southern European countries “PIGS”, unfavourably contrasting them with the supposedly harder-working northerners in Germany, the Netherlands and Nordic countries.

According to newly released data, the PIGS have, perhaps for the first time, a lower unemployment rate than Sweden, Norway, Iceland, Finland and Denmark (see chart 2). In Greece joblessness is just 8.2%; hoteliers are complaining about labour shortages. By contrast, Finnish unemployment recently rose above 10% for the first time since the 1990s. Forget the PIGS. It is time to worry about SNIFD.

The convergence between the Nordics and southern Europe in part reflects a more fundamental trend. Labour markets across the rich world look increasingly similar. In the 2000s the annual unemployment rate of the most jobless country was on average 14 percentage points higher than in whichever was the most jobful. Today that gap is just eight percentage points. Almost everywhere has reasonably low unemployment.

A number of factors may explain this trend. Better education means fewer people are genuinely unemployable. Improved technology, for example platforms such as Indeed and LinkedIn, makes it easier to match workers with jobs. Tougher benefits policies have made it harder to get by on the dole. The result is that one rich country’s labour market is increasingly indistinguishable from another’s.

That said, SNIFD could still learn a thing or two from the PIGS. The OECD recently praised Italy’s programmes for improving lifelong learning, which may have helped reduce long-term unemployment. The IMF has noted that Greece’s reform efforts “have facilitated labour-market adjustment since the pandemic”. The fund also praised Spain “for the unprecedented decline in temporary employment” that followed a labour-market reform in 2021. While Nordic labour markets sniffle, their porcine rivals really are flying. ■