The extraordinary levels of unemployment in Europe call for a reassessment of the priorities and responsibilities of social and economic policies. Unemployment causes penalties not only in the form of loss of family incomes and national output, but also in many other ways: deterioration of people's skill and motivation; loss of personal freedom; worsening of health and psychological equanimity; weakening of self-esteem and motivation for future work and job search; aggravation of racial and gender inequalities; disruption of human relations and family life; weakening of social cohesion; and technical and organizational inflexibility related to induced pessimism about employment prospects. Employment policies need to be reconsidered in a more comprehensive way (involving demand management, employment incentives, retraining and skill formation, and research in labour-friendly technologies), going beyond a compartmentalized view of problems of work, reward, security and production. The growing emphasis in European countries on people's ability to help themselves, rather than be excessively dependent on the state, requires a big reduction of unemployment. Tolerating high levels of unemployment undermines the foundations of a society in which self-help is possible.
Paper prepared during Professor Sen's tenure as Visiting Scholar at the Research Department of the Bank of Italy.
