Unemployment in The U.S. is Higher than Europe, but There is a Catch

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Unemployment - United States flag by Patrick Tomasso - Unsplash
Unemployment - United States flag by Patrick Tomasso - Unsplash

The unemployment rate in the U.S. has risen from 3.5% to a 14.7% in 2020 amid the corona-virus outbreak. Looking at the figures, the country is facing the worst economic downturn since the 2008 Depression.

However, the U.S. isn’t the only country suffering from the Covid-19 collateral damage as the United Kingdom also suffered the worst economic contraction since 1709. The current economic conditions suggest that the contraction will definitely last for another year, as the roll-out of the Covid-19 vaccine is going on a very slow rhythm.

Nevertheless, rich countries have dealt with the Covid-19 economic damage in different ways. Take the Canadian governments that sent over $2000 per month to its citizens as an aid for jobless people. Canada concentrated on providing aid to its citizens instead of trying to provide jobs as the Covid-19 pandemic had severely hit the labor market — limiting the possibility of providing jobs for everyone.

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The United States and Ireland have both followed the same strategy providing stimulus checks and unemployment benefits.  The intention remains easing economic damage due to covid-19 on the jobless. However, Europe and Australia followed a different strategy and focused on providing workers’ more wages in the form of short-time working schemes and furlough programs. 

Unemployment measures in the U.S. and Europe

These are not the only differences between the two groups. For example, Britain and Ireland’s “unemployment” isn’t the same as the United States’. Ireland and Britain’s Covid-19 related unemployed citizens remain tied to employers and are therefore, not considered unemployed.

On the other hand, Canadian and American governments count citizens as unemployed the moment they stop working. This occurs even if the furlough is only temporary. The way statisticians count unemployment in the two groups explains the different rates in the two continents Europe and America.

The methodologies for counting and maintaining this information create stark differences in data reported. For instance, Australia’s unemployment rate was 6%. If counted the using the same formula as the U.S. then it would have been 12%. However, Australia’s GDP fell by 7% in the 2nd quarter of 2020 compared to the United States 34.4% plunge in GDP in the 2nd quarter of the same year.

No matter the way unemployment is counted, governments’ efforts to provide more jobs will follow conventions and measures. Unfortunately, Europe will be facing continued difficulty in ending the furlough schemes set up amid the Covid-19 pandemic.