LER 100 Lecture Notes - Lecture 2: Call Centre, Mcdonald'S

Topic: Why is unemployment so high in Europe? Briefly discuss.

Optional reading: You can use any Web browser to search for the words “European unemployment.” Just by scanning the headlines, see how many possible explanations you can list. Why Is Unemployment So High in Europe? Between World War II and the mid-1970s, unemployment in Western Europe was low. From 1960 to 1974, for example, the unemployment rate in France never got as high as 4 percent. The worldwide recession of the mid-1970s, however, jacked up unemployment rates. But unemployment continued to climb in Continental Europe long after the recession ended, topping 10 percent during the 1990s, and was still 8 percent to 9 percent in 2007. Some observers claim that the natural rate of unemployment has increased in these countries. Economists have borrowed a term from physics, hysteresis (pronounced his-ter-eé-sis), to argue that the natural rate of unemployment depends in part on the recent history of unemployment. The longer the actual unemployment rate remains above what had been the natural rate, the more the natural rate itself increases. For example, those unemployed can lose valuable job skills, such as the computer programmer who loses touch with the latest developments. As weeks of unemployment stretch into months and years, the shock and stigma may diminish, so the work ethic weakens. What’s more, some European countries offer generous unemployment benefits indefinitely, reducing the hardship of unemployment. Some Europeans have collected unemployment benefits for more than a decade. No consensus exists regarding the validity of hysteresis. The theory seems to be less relevant in the United States and Great Britain, where unemployment fell from 10 percent in 1982 to 4.5 and 5.5, respectively, in 2007. An alternative explanation for high unemployment in Continental Europe is that legislation introduced there in the 1970s made it more difficult to lay off workers. In most European countries, job dismissals must be approved by worker councils, which consider such factors as the worker’s health, marital status, and number of dependents. Severance pay has also become mandatory and can amount to a year’s pay or more. With layoffs difficult and costly, hiring became almost an irreversible decision for the employer, so firms have become reluctant to add workers, particularly untested workers with little experience. Also, high minimum wages throughout Europe, high payroll taxes, and an expanded list of worker rights have increased labor costs. For example, in Sweden, women are guaranteed a year’s paid leave on having a child and the right to work no more than six hours a day until the child reaches grade school. Swedish workers are also guaranteed at least five weeks of vacation a year; French workers get at least six weeks (Americans have no minimum vacation guarantees). Regardless of the explanation, the result is high unemployment in Continental Europe, particularly among young workers. As noted in an earlier chapter, 60 percent of those unemployed in Germany in 2006 had been out of work more than a year, versus less than10 percent of those unemployed in the United States. Few private sector jobs have been created there since 1980. If Continental Europe had the same unemployment rate and the same labor participation rate as the United States, about 30 million more people there would be working there.

two more pages of elaboration to how Trumpcare and Obamacarerelates to health care finance. 30 resources

Obamacare, also known as the Affordable Care Act (ACA), waspassed in 2010 as a health care insurance plan for all Americans.The law made many changes to the existing minimum coverage ininsurance, and increase the federal subsidies for the middle-incomehouseholds of the country. Trumpcare, also known as the AmericanHealth Care Act (AHCA), is a replacement health insurance plandesigned to partly repeal the existing ACA. The new healthcarebill, is one step closer to repealing . The nonpartisanCongressional Budget Office (CBO) has an estimate with ACA as thelaw of the land, the uninsured Americans would be 28 million willremain stable for the next decade. The analysis of an earlierversion of the bill, there is an estimate of 54 million could beuninsured by 2026 in case of implementation of the AHCA. The ACAhave provision to impose penalty on consumers who can afford to buyhealth insurance but do not do so, known as the individual mandatepayment. it’s paid when you file your federal tax return. Thispenalty can be either 2.5% of income up to the totalyearly premium or $695 per person up to $2,085, whichever ishigher. AHCA eliminates the individual mandate and offers anincentive to consumers who maintain insurance coverage: insurancecompanies can charge a 30% penalty who buy health insurance afterhad a gap in required coverage exceeding 63 days. The 30% penaltywould apply for 12 months. The ACA requires that all major healthpolicies sold to consumers offer coverage for 10 categories ofessential health benefits: Outpatient services, Emergency services, Maternity and newborn care, Hospitalization. Prescriptionmedication , Mental health and substance abuse services, Laboratoryservices. Pediatric services, Rehabilitation services, includingvision and oral. Preventative, wellness, and chronic diseasemanagement services. The AHCA eliminates these protections bygiving a waiver to define what they consider essential healthbenefits. States could allow insurance companies to sell plans thatdo not cover prescription drugs or maternity care. The ACA and AHCAhave the same rules for newborns. A baby can be added to familyexisting health insurance plan or can buy a new plan to give coverthe baby. AHCA is making major changes in the health insurance byreducing the requirements and making change in the structure oftotal offered government subsidies. On the analysis, the CBO hasreported the current changes would make health insurance moreaffordable for few customers. Obamacare: The ACA increased Medicaretaxes for the households having incomes above $250,000. Thelegislation gave some tax credits to middle-income earners to helpthem pay out-of-pocket health expenses. The AHCA repeals taxes ofprevious insurance plan. It was mandatory for the companiesemploying more than 50 employees to offer health insurance or pay apenalty. Trumpcare: The mandatory insurance of employees andpenalty has been repealed under Senate plan. Insurance fordependents under 26 (Obamacare) : It requires insurer that thechildren under the age of 26 are allowed to be covered under theparent's policy. Trumpcare: Well this requirement is not repealedby trump care. Trumpcare: Pre-existing condition coverage(Obamacare):The insurer is prohibited fromdenying coverage or charging more to individuals whohave pre-existing medical conditions. Trumpcare: Gives states theability to opt-out of requirements that insurers charge the samepremiums for healthy and sick customers. Women care (Obamacare): Itis mandatory for the insurance companies to provide core servicesincluding maternity care and contraceptives and the insurancecompanies are prohibited from charging women more than men for thesame health plan. Planned Parenthood receives federal funding forfamily planning and other medical services used by Medicaidrecipients. Abortion cannot be funded with federal dollars.Trumpcare: Insurance companies prohibited from charging women morefor health insurance, but states could apply for waivers that allowthem to drop coverage for maternity care and contraceptives. Thebill also bans women from using government money to buy plans thatcovers abortion and ends non-abortion Medicaid reimbursement toPlanned Parenthood, a non-profit group that provides abortionservices in some of its clinics, for one year. Older Americans(Obamacare):The insurer are not allowed to charge the olderAmericans more than three times the cost for younger Americans.Trumpcare: States can receive waivers to allow them to charge olderAmericans more. Insurance marketplaces (Obamacare) : The Obamacaremarketplaces, such as HealthCare.gov, enable people who don't gethealth benefits at work to compare plans, just as they mightcompare hotel rooms or airline tickets online. All plans on themarketplaces must offer a basic set of benefits, such as hospitalcare, mental health services and prescription drugs. Trumpcare:Under both the House and Senate bills, it is unclear how themarketplaces would work because insurers might potentially offerhealth plans that do not offer the same set of benefits.