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The European countries are among the most industrialist countries in the world. The level of poverty in these nations is extremely low as compared to areas such as Asia, Latin America and African. However, despite the countries’ steps in development, there was a burden of unemployment. The European countries have experienced a crisis on issues of employment since 1970s. For instance, in early 1980s, European industrialization was hit by snail-pace improvement in economic growth. This was highly contributed by the hiking rate of unemployment (Blank 21).
There are several theories to support the poor connection between the level of development and the unemployment rate. Apart from the issue of unemployment, other issues that have influenced the economy of Europe include social protection and employees’ salaries. Economic analysts have expressed their concern on the issue of complex trade-off resulting from these three factors. Trade-off is a concept in economic that aims at maximizing the profits and returns of a business project. This is achieved through undermining one or more favorable aftermaths for a speculated increase in business results.
To some extent, the unemployment in the European countries is attributed to the individual countries. Other factor is related to the institutions and organizations, which are employing citizens. Institutional factors such as minimum wage policies, regulations of the working hours, retirement age, tax, privileges entitled to employees and complexity of employment terms. The nations that have outstanding dole programs raise unemployment since the programs skyrocket the reservation wages of such employees, thus blocking them from the job market (Muffels et al.).
The existence of the trade-off is also attributed to the technological changes in these countries. To suit the market demand and maintain their competitiveness in the market, the organizations are in a state of revolution and renovation. Therefore, as technology changes, new skills are required when such organization adopts the new technology. Social protection remains a core determinant of the products produced; thus, the most affected or foregone factor is the job market. Old skills are faced out firing off some of the employees and acquiring others. For the benefit of escalating the profits, the efficiency of the acquired labor is put into consideration. Improved technology is also associated with mechanical use in the work place to a greater extent than human labor. This causes the level of unemployment to increase in the society since a machine can replace several workers (Muffels et al.).
In trade-offs a concise decision has to be arrived at after an evaluation of merit and demerit of the adopting the decision at hand at the expense of others. Some economists also refer to this term as opportunity cost. In Europe, a complex level of trade-off has been noted to be promoted by the fact that competition in the world has enormously expanded. This leads to the formulation of policies in the labor market that have impacted the economic progress. The organizations’ labor relations involvements contribute to the worker’s ability to adapt to the ever-changing economic situations in the world. This results from enactment of rules that regulate the wages of the workers to a non-adjustable level.
Employees find it difficult to employ workers in times of high demand in fear of breaking the rules and regulations. The legislation that restricts managers or employees from firing employees from their workplace is both beneficial and detrimental. To some extent, they add security to the job making employees feel motivated to work, while in, on the other hand, employees are deprived of the authority to be fired at their will. This causes a situation when they forego employment for machines or increase wages to motivate their workers. In such situations, the level of employment will still be low irrespective of the economic status of the nation. This is one of the contributing factors to a trend of increase in unemployment since 1970 especially in the European countries. Moreover, employees’ groups in the firm can be a drawback in the process of adjusting salaries in respect to the situations of the market. This causes complexity of trade-off regarding the wages and employment.
In order to evaluate the extent of employment in a nation, the numbers of employees in each year or a given period are evaluated and the trends are assessed. The trend will dictate whether there is decline or improvement in the number of individuals being employed. In Europe, a close examination has revealed that the level of unemployed individuals has been on the rise. However, there has been a noted decline in the rate. The attributes associated with this have been evaluated to deduce the situation within the European countries on the bases of Philips curve.
The issue of skills among the workers is also a determinant of the level of unemployment and wages decision making. The skills that are needed in the working environment by different organizations dictate the number of employees to be hired. Workers’ ability to adapt to market-society also significantly contributes to the trade-off decisions regarding the wages, level of employment and alternatives to these choices. Low mobility of labor in the society has also been connected to skyrocketing of unemployment. In addition to these facts, it is also evidenced that skills mismatch remains a vital pillar for consideration on who to choose even in times of peak labor requirements.
In Europe, the unemployment has become a crucial problem starting from the 1970s. The problem is highly associated with the lack of organizations’ investments in physical capital. This has escalated the wages leading to short-time employment. The investors were then faced with difficulty in employing workers at the set wage level. American considered lowering the wages that was a core factor in production and sustainability of the firms at the expense of social protection. In fact, the inside/outside model should have helped the Europeans to understand that the unemployed community had little to complain about the wages offered. This would have created a reasonable chance for superfluous labor resulting to increase in production and hence, higher profit. Instead, the human capital deteriorated resulting in adverse effects in the end. This has contributed enormously to the dilemma of trade-off in the European region.
The labor and the economic analysts have stressed that flexibility in the employment arena and coupled with less social protection would have contributed to reduction of unemployment level. The point being communicated in this part is that, by cutting on the number of relations in the organization that targets the labor forces, would give a chance to reduce wages at the expense of employing many workers. The eminent tradeoff examples witness in Europe includes the realization of importance of flexible labor market. This was emulated by the likes of France, which campaigned for boosting the level of work sharing, while Italy withdrew the automated wage indexing.
In the early 1980s, Germany and Spain came up with the idea of contracting. This was favor due to the ability to limit the duration of employment. Therefore, the organizations were, able to increase the number of employees in durations when supply had to be boosted. Following the same rule, the number of employees would be regulated during the “dry” market seasons.
Social protecting was forgone in Britain, when the country modified its labor laws to reduce the strength and power of the labor relations and other movement that were causing challenges in the employment. Some European countries borrowed the idea of America, where unemployment privileges and other social guarding programs were cut down. The steps to be taken by each country lead to a down fall in the rate of unemployment with time.
The prime factors noted to cause the complex trade-off in Europe are mostly firm demanding labor market organizations. These include job security, unemployment privileges and a wide aspect of workforce agreements. To some extent, the tradeoff’s experience between lack of jobs and wage inflation is also influenced by the macroeconomic impacts (Jones 22). The concurrence of low stabilized wage inflation and escalating level of unemployment affects the state of the Phillips curve trade-off. In normal circumstances instances of higher inflation should lead to venerability of real wage changes.
Moderate levels of inflation are known to cement the strategies of regulating or modifying wages that employees are to receive. The great impact of inflation is founded on the assumption of declining nominal wage stringency. The attribution of wages to their influence on unemployment dictates the extent of diligence in the nominal wages. For instance, the European escalated and persistent unemployment has failed to exert pressure on remuneration to bring down the level of employment. Phillips curve trade-off cannot account for the level of unemployment in European countries. This is because, in the past years, inflation experienced in these countries was not as eminent as the current, though the trend of unemployment was on the reverse trend. Keynesian economist explained that in the decision to fight unemployment, improving the demand could result in expansion of the market since the supply is believed to be flexible. However, the new classical analysts hold the view of manipulating the wages and prices to stabilize the economy. This would then end up in boosting the economy of the state. Once the economy is immune to inflation, the chances of employment will emanate to accommodate the unemployed in the society.
Scrutinizing a Phillips curve reveals that an increase in the demand of an organization, as well as that of the country, would lead to expansion of the job vacancies. This would then reduce the unemployment at a cost of higher wages level. Therefore, in the decision-making, the planners have to be skeptical in evaluating the benefits of the two factors and their effect on the market-society. This in its turn leads to a state of trade-off dilemma in the society. Chances of reducing the rate of unemployment in European countries face challenges in the sense that, once the employees realize that the price of products has increased, they demand higher wages. This results in reduction of the employment rate in the country consequently raising the level of unemployment (Jones).
Contemporary world demands for an organization that is competitive in a position to survive in the heated and highly competitive marketing society. The need to maintain the products and services of an organization at the peak of priority among the consumers pressures organizations to take into consideration an income, social privileges and job protection conditions for workers. However, the inflation rate in these countries has caused a dilemma on how factors in production will be balanced effectively. There is a noted shift to a more flexible form of employment, from an employment protection at the company level to a social protection. The shift causes a trade-off between the employment and social protection in these organizations. The labor relation set in to stabilize the condition by initiating negotiation forces for protection and stabilization of wages of the employees.
In respect to labor supply, social protection measures have been a key consideration. Low rental cost in public housing in certain cities of the countries has limited the need to seek employment in other cities. Moreover, social collaboration has also affected the employer’s decision in the mode of formulating socially acceptable policies related to their job market. For instance, the hiring and firing policies lead to disorientation wage signals, decrease of the profit margins, and consequently raise of unemployment level. Unemployment results from the fear of incurring loss related to increased expenses due to increased number of workers even in times of low demand (Blank 30).
In conclusion, a number of factors have been attributed to the complexity of trade-off concerning the issue of unemployment, wages and social protection in Europe. This has resulted in a need striking equilibrium on this conundrum. The factors that have to be considered are flexibility of the market, job security, and wages regulations that will see the expansion of the economic arena. Moreover, the strengthening of the functional stability rather than numerical flexibility will be of paramount effect in the creation of a job, strengthening the understanding of the wages regulations, and ensuring a state of social protection is maintained. Trade-off though an important factor in the production and profit margin determinant, it should not be used to violate the consumers and society integrity. Therefore, it is imperative to conduct a concise analysis of the factors playing a key role in the production and their implications.