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Just to give you some perspective - in Italy ,unemployment among the young part of the population is around 35% and the ones who managed to find a work are usua

Just to give you some perspective - in Italy ,unemployment among the young part of the population is around 35% and the ones who managed to find a work are usually underpaid to a point that it's basically impossible to afford a rent, even less buy a house. We're talking 700/900 eur a month here, for highly skilled people (engineers and such). I honestly have no idea how things will be fixed (hint: they will not be fixed) but certainly lower wages and higher unemployment are not an option unless you want the population to literally starve. Young people in Italy have been living off their parents for more than a decade now, if it weren't for them the vast majority of the population under 30 in Italy would be really really poor by now.

yummyfajitas 15y ago
Bryan Caplan has a solution for the American poor, which would probably also work for Italians. He discusses it in his essay, "Let them get roommates". http://econlog.econlib.org/archives/2005/03/let_them_get_ro.html http://econlog.econlib.org/archives/2005/03/let_them_get_ro.... If wages were flexible, Italy would not have 35% youth unemployment. It would have 5% unemployment at considerably lower wages. Italy has a GDP per capita of $30k/year (PPP adjusted). That's very far from starvation. Even if wages drop to $10k/year, no one will "literally starve."
- andreadallera 15y ago
  Wages are very flexible around here - most of young people don't have regular contracts, and already earn less than 10k/year. With no benefits, no insurance, no 401k.
  - yummyfajitas 15y ago
    In that case, according to Keynesian economics, Italy should have no unemployment. Wages should already have fallen so far that it is now profitable to hire workers. If Italy does have unemployment with flexible wages, then Keynesian economics must be wrong. In that case, you must agree that gizmo was wrong when he claimed "austerity...leads to...high unemployment...[etc]". Take it up with gizmo, not me - I'm not a Keynesian. I'm just asking why Keynesians don't follow their theories to their logical conclusions.
    - aero142 15y ago
      I always thought the primary belief of Keynesians was that poor aggregate demand led to recessions. Sticky nominal wages was a factor in high unemployment, but it is weak aggregate demand that was where the horns are. Therefor their solution was to pump money into the demand side so that would drive spending. Demand side spending encourages business investment and this jumpstarts the economy. As far as I know, most economists would argue that if nominal wages weren't sticky, unemployment would be less of a problem. When you say "Italy should have no unemployment", I'm not sure who you are arguing with, but I don't think it is Keynesians.
    - nl 15y ago
      I don't know where you are getting your ideas about Keynesian economics and wage policy, but they are almost completely the opposite of what Keynesians believe. He also argued that to boost employment, real wages had to go down: Nominal wages would have to fall more than prices. However, doing so would reduce consumer demand, so that the aggregate demand for goods would drop. This would in turn reduce business sales revenues and expected profits. Investment in new plants and equipment—perhaps already discouraged by previous excesses—would then become more risky, less likely. Instead of raising business expectations, wage cuts could make matters much worse. Further, if wages and prices were falling, people would start to expect them to fall. This could make the economy spiral downward as those who had money would simply wait as falling prices made it more valuable—rather than spending. As Irving Fisher argued in 1933, in his Debt-Deflation Theory of Great Depressions, deflation (falling prices) can make a depression deeper as falling prices and wages made pre-existing nominal debts more valuable in real terms. [1] To summarise, Keynesians generally believe that decreasing wages deceases aggregate demand, which discourages growth. The general Keynesian to high unemployment during a recession is to increase government stimulus to increase aggregate demand. That approach is problematic in Europe at the moment, as the infographic illustrates. [1] http://en.wikipedia.org/wiki/Keynesian_economics#Wages_and_spending http://en.wikipedia.org/wiki/Keynesian_economics#Wages_and_s...
      - yummyfajitas 15y ago
        Um, you quote a passage declaring that according to Keynes, real wages need to go down to boost employment. He says this is difficult because nominal wages are sticky. How does that differ from what I said? Note that I wasn't advocating a deflationary spiral, I was advocating a stimulative wage cut while allowing price levels to rise. See also: http://en.wikipedia.org/wiki/New_Keynesian_economics http://en.wikipedia.org/wiki/New_Keynesian_economics
  - iaskwhy 15y ago
    Same in Portugal but you don't even need to talk about the young people. Average wage is 1000 eur, 700/900 eur would be a good salary for most young people in Portugal. It's also funny how people talk about the lazy people from the South. I actually work in London and people work much less hours there than in Portugal.
nradov 15y ago
Things will be fixed through emigration. (At least that's been the traditional solution.)

yummyfajitas 15y ago

Bryan Caplan has a solution for the American poor, which would probably also work for Italians. He discusses it in his essay, "Let them get roommates". http://econlog.econlib.org/archives/2005/03/let_them_get_ro.html http://econlog.econlib.org/archives/2005/03/let_them_get_ro.... If wages were flexible, Italy would not have 35% youth unemployment. It would have 5% unemployment at considerably lower wages. Italy has a GDP per capita of $30k/year (PPP adjusted). That's very far from starvation. Even if wages drop to $10k/year, no one will "literally starve."

andreadallera 15y ago
Wages are very flexible around here - most of young people don't have regular contracts, and already earn less than 10k/year. With no benefits, no insurance, no 401k.
- yummyfajitas 15y ago
  In that case, according to Keynesian economics, Italy should have no unemployment. Wages should already have fallen so far that it is now profitable to hire workers. If Italy does have unemployment with flexible wages, then Keynesian economics must be wrong. In that case, you must agree that gizmo was wrong when he claimed "austerity...leads to...high unemployment...[etc]". Take it up with gizmo, not me - I'm not a Keynesian. I'm just asking why Keynesians don't follow their theories to their logical conclusions.
  - aero142 15y ago
    I always thought the primary belief of Keynesians was that poor aggregate demand led to recessions. Sticky nominal wages was a factor in high unemployment, but it is weak aggregate demand that was where the horns are. Therefor their solution was to pump money into the demand side so that would drive spending. Demand side spending encourages business investment and this jumpstarts the economy. As far as I know, most economists would argue that if nominal wages weren't sticky, unemployment would be less of a problem. When you say "Italy should have no unemployment", I'm not sure who you are arguing with, but I don't think it is Keynesians.
  - nl 15y ago
    I don't know where you are getting your ideas about Keynesian economics and wage policy, but they are almost completely the opposite of what Keynesians believe. He also argued that to boost employment, real wages had to go down: Nominal wages would have to fall more than prices. However, doing so would reduce consumer demand, so that the aggregate demand for goods would drop. This would in turn reduce business sales revenues and expected profits. Investment in new plants and equipment—perhaps already discouraged by previous excesses—would then become more risky, less likely. Instead of raising business expectations, wage cuts could make matters much worse. Further, if wages and prices were falling, people would start to expect them to fall. This could make the economy spiral downward as those who had money would simply wait as falling prices made it more valuable—rather than spending. As Irving Fisher argued in 1933, in his Debt-Deflation Theory of Great Depressions, deflation (falling prices) can make a depression deeper as falling prices and wages made pre-existing nominal debts more valuable in real terms. [1] To summarise, Keynesians generally believe that decreasing wages deceases aggregate demand, which discourages growth. The general Keynesian to high unemployment during a recession is to increase government stimulus to increase aggregate demand. That approach is problematic in Europe at the moment, as the infographic illustrates. [1] http://en.wikipedia.org/wiki/Keynesian_economics#Wages_and_spending http://en.wikipedia.org/wiki/Keynesian_economics#Wages_and_s...
    - yummyfajitas 15y ago
      Um, you quote a passage declaring that according to Keynes, real wages need to go down to boost employment. He says this is difficult because nominal wages are sticky. How does that differ from what I said? Note that I wasn't advocating a deflationary spiral, I was advocating a stimulative wage cut while allowing price levels to rise. See also: http://en.wikipedia.org/wiki/New_Keynesian_economics http://en.wikipedia.org/wiki/New_Keynesian_economics
- iaskwhy 15y ago
  Same in Portugal but you don't even need to talk about the young people. Average wage is 1000 eur, 700/900 eur would be a good salary for most young people in Portugal. It's also funny how people talk about the lazy people from the South. I actually work in London and people work much less hours there than in Portugal.

nradov 15y ago

Things will be fixed through emigration. (At least that's been the traditional solution.)