Wednesday, November 22, 2006
Today, the statistics bureau of Europe's two freest economies, Estonia and Latvia released their employment data. In Estonia, unemployment have fallen to 5.4% from 7.0% a year ago, while in Latvia, unemployment have fallen from 8.7% to 6.2%. In both cases, this occurred despite a significant increase in labor force participation. Total employment rose a full 6.2% in Estonia and by 7.2% in Latvia. While this rate of increase is unsustainable because first of all, there is a cyclical element in the Baltic boom (Both Estonia and Latvia have pegged their currencies to the euro and is therefore forced to adopt the loose monetary policy of the ECB) and secondly because Estonia and Latvia will soon run out of potential workers, this illustrates that low taxes and low welfare benefits will help to increase employment, contrary to the assumptions of certain leftist economists.