ABSTRACT
High unemployment stands as the most visible sign that Social Europe is not working properly. With so many people unable to find a job, considerable strain is placed on the claim that Europe’s brand of welfare capitalism is economically functional. Sooner or later, if Europe fails to reduce its jobless numbers, it is almost certain that social protectionist systems will be radically reduced, if not dismantled altogether. This chapter examines why European unemployment has proven to be so stubbornly high and assesses what is being done about it. In particular, it sets out and evaluates the dominant approach to explaining persistent unemployment in Europe, which can be called New Keynesianism. In addition to developing a diagnosis for widespread joblessness, New Keynesian economists have been exhorting governments to adopt employment measures that fall under the umbrella term ‘active labour market policies’. This chapter also examines the extent to which such policies have been diffused, and evaluates whether these will be the remedy to the unemployment crisis.
