EUROPE - A LABOR SURPLUS ECONOMY

Reviewing the persistence of high levels of unemployment in the EU, fi nds that this has been accompanied by an increasing incidence of low p ay and the adoption of ''atypical'' employment contracts. The policy r esponse, drawing on the experience of the US economy, has been to advo cate the creation of flexible labour markets. It suggests that it is n ot possible to account for the deterioration in the European labour ma rket in terms of an increase in the supply of labour. The fall in dema nd for labour is examined in terms of long-run structural changes and in particular it draws attention to the impact of increased import pen etration. Finally it discusses the consequences for public funding of welfare, investment in education and training, and the emergence of a permanent labour surplus economy.