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Won't move, can't move: euro zone's jobless sit tight

The car plant where 46-year-old Agathe Martin works is shutting down, but when PSA Peugeot offered her a job in another factory elsewhere in the Paris region she said "Non".

After 17 years working in the same plant, taking the job would have meant either a much longer commute or losing her cheap social housing and uprooting her two daughters in a move.

The single mother prefers to stay put and look for another job even if that will be hard amid soaring unemployment and with only factory work and small jobs on her CV. If all else fails, she will still have more than 60,000 euros in severance pay.

"I am lucky enough to have a small house with a rather modest rent and I would not find that elsewhere," Martin said, huddled in a bicycle shed to escape the rain with colleagues who had just cashed in their severance cheques.

More than 2,000 km (1,250 miles) away on the sunny Italian island of Sicily, 47-year-old Calogero Cassia struggles with the same problems.

After losing his job nearly two years ago when the Fiat plant near Palermo where he had worked for 25 years shut down, the father of three would be happy to take any kind of job in the area, where he has strong family ties.

But he worries that he does not have the skills to transfer to other sectors.

"If you look around it is just desperation, you find nothing, we can't manage," he said. The Termini Imerese plant, the main local employer, shut because of its remote location on an island south of mainland Italy, with 2,200 workers affected.

In both countries, hit by industrial decline and factory shut-downs, the lack of mobility fuels raging unemployment, adding to recession and lagging competitiveness.

Too many workers are unwilling or unable to move from one sector to another or one region to another, due to a debilitating mix of factors from high real estate prices to deficient training and family dependency.

The immobility in wealthier "old Europe" is a contrast to the hundreds of thousands of workers from poorer central and eastern Europe who took advantage of the EU's free movement of labor to flock westwards in the mid-2000s in search of jobs.

About 19.2 million people are now out of work in the 17-nation euro zone, a top priority for EU leaders who meet on Thursday and Friday in Brussels, but with little concrete relief to offer.

Housing Costs

The number of jobless is at a record high Italy, where it reached 12 percent in April, and in France, where analysts polled by Reuters see it at 11.5 percent in the last quarter of 2013. Among young people, the unemployment rate is more than double.

So greater movement across jobs and regions is an imperative at a time when whole sectors are struggling and factories closing, says Herve Boulhol, the lead economist for France at the OECD think-tank.

"When a sector is in decline, restructuring and reallocation of jobs takes too much time in France. Some of the labor rules, including on collective redundancies, need to be trimmed, while training and assistance to find jobs must be improved," he said.

People move eight times less among the EU's 27 member states than between the 50 U.S. states, according to OECD 2010 data.

This is partly due to language barriers. But even between regions of a same EU country, mobility is still nearly two-and-a-half-times lower than among U.S. states, data on the EU's 15 oldest states shows.

More people from crisis-hit southern EU now want to move to the wealthier north, but mobility within countries is still low, the European Commission said in a report on Tuesday.

A key obstacle in France is the jump in real estate prices in the past decade, with 40 percent of French businesses blaming housing problems for difficulties in recruiting staff or transferring them to another location.

People who have rented the same home for years will lose out if they move, especially if they have to give up subsidized social housing.

For Peugeot worker Martin, this was the main reason not to accept the job offer in Poissy, west of Paris, when her plant in Aulnay-sous-Bois in the northern suburbs shuts down next year as the loss-making French group tackles production over-capacity by cutting 8,000 jobs nationwide.

She pays just 320 euros per month for a modest house with a garden south of Paris, thanks to a deal struck between Peugeot and the local authority landlord. That is affordable on her monthly salary of 1,200 euros ($1,600) and a bargain in a region with the highest real estate prices in the country.

For those who own their home, high transaction costs, from notary and registration fees to taxes, are a major obstacle to moving, which the government plans to tackle with tax breaks.

France has the second-highest housing transaction costs among 33 OECD countries in a study the think-tank based on 2009 data - nearly three times higher than in the United States.

Skills Mismatch

Italy is a nation of home owners and many young Italians live with their parents.

While younger people with fewer ties are more likely to move abroad or to the wealthier north, they can be put off by the types of work contract they are offered, said Raffaele Fabozzi, professor of labor law at LUISS University of Rome.

"A young person who has to move to another region has to pay for their rent ... so if they don't have a stable contract they don't have any reason to leave their family home," he said.

Italy, like France, has a two-tier labor market that gives protection and benefits to salaried workers and hardly any rights to hundreds of thousands of mostly young people on temporary contracts. In the current recession, employers have become even more reluctant to hand out long-term contracts.

Unemployed people also face difficulties moving to new sectors due to limited retraining and qualification services.

Welfare spending in Italy has traditionally focused on pensions, while spending for labor policies has been more limited, said Luca Paolazzi, head of the research unit at employers' lobby Confindustria.

"We have few active policies to boost work. We have few training, education and requalification capacities and ability to move workers from one sector to another," he said.

In France, government officials acknowledge privately that too much is spent on generous unemployment benefits and not enough on training. But reforming the unemployment benefit fund, is a matter for negotiation between labor unions and employers, due to begin this autumn.

Rudy Tichy, who heads a public employment agency in Altkirch in the eastern French region of Alsace, said the closure of big plants in former industrial regions such as his triggered a skills mismatch which requires people to either move or retrain.

"Half of the people registered here have industry sector profiles but the jobs on offer are in the services sector, personal assistance to people, trade," he said.

Family Ties

Beyond that experience mismatch and the practical difficulties of moving a family and making sure both spouses have a job, "French tradition means people simply don't have geographic mobility in mind," said Tichy.

While France has an extensive network of childcare services and subsidies, in Italy, many families rely on grandparents to help look after children, which also makes it harder to move.

In Lazio, south of Rome, 57-year-old Guerino Ventre is struggling to make ends meet with the roughly 1,000 euros a month he earns for working about 10 days a month since Fiat's Cassino plant in Lazio started running at reduced hours.

But the father of three grown children, who has been working in the plant for 34 years, said he doesn't want to leave the region, where most of his relatives live.

"I have my family here now, my things. And then there is the question, where to and to do what? All plants are experiencing the same situation, so moving does not make a difference."

($1 = 0.7461 euros)

[Source: By Ingrid Melander and Catherine Hornby, Reuters, Paris and Rome, 27Jun13]

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