Ever since the developed world hit the skids in the Great Recession, unemployment has been a chronic barrier to economic growth and a literal disaster for millions of people. Austerity policies designed to reign in government budget deficits have exacerbated the problem, taking off the table the type of fiscal stimulus policy enacted by the Obama administration in 2009.
While monetary policy stimulus has undoubtedly at least kept unemployment problem from getting worse, but isn’t an efficient tool for bringing down the unemployment rate. With growth rates in the developed world still not recovered, at least some policy makers and economists are wondering if it’s time to put fiscal stimulus back into play, reports Reuters.
Unemployment rates across the Eurozone are staggeringly high. And while the U.S. is showing progress in bringing unemployment down, the official rate understates those who have dropped out of the workforce due to discouragement and others who have been forced into early retirement.
Particularly among the young, unemployment is an issue that is likely to permanently impact the future ability to advance professionally and lifetime earnings, even once a job is obtained. The International Labor Organization predicts that unemployment among 15-24 year olds will rise globally to 74.2 million this year, up 5 percent since the Great Recession began.
The only real way to attack this problem is through some kind of fiscal stimulus. Austerity has killed European economic growth rates and not really done that much to meaningfully bring down government deficits because it’s more of a program to bailout the continent’s banks, but that’s a blog for another day.
The EU can help the unemployment problem and the deficit problem by easing off the austerity path and allowing countries to enact meaningful, long-term fiscal stimulus measures. Ultimately, these will help restore economic growth, which will act to bring down budget deficits faster than budget-cutting economies in a recession can possibly do.