The Countries With the Highest Unemployment

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The U.S. unemployment rate continues to tick down, hitting a more than four-year low of just 7.6% in March. In much of Europe, however, the situation is very different. If the latest developments in Cyprus are any indication, the economic and employment woes of Europe are nowhere near over.

According to the latest figures released by Eurostat, the statistical agency that measures the European nations, the United States and Japan, the unemployment rates in 10 countries were roughly four percentage points higher than in the United States. These include the poster children for the European debt crisis, Spain and Greece. According to the most recent data, Spain’s unemployment rate is 26.3%, while Greece’s is even higher, at 26.4%.

Click here to see the countries with the highest unemployment

While unemployment in the U.S. rose sharply during the recession, from 5.8% in 2008 to 9.3% in 2009, the effects of the European debt crisis were even more rapid and severe — especially in some of the nations where unemployment remains high. In Lithuania, the unemployment rate increased from 5.3% in 2008 to 13.6% in 2009. Ireland had the lowest unemployment rate of the 31 countries reviewed in 2005. Now, it has one of the highest rates in Europe.

24/7 Wall St. reviewed the countries measured by Eurostat because they are primarily developed nations. While many other countries have higher unemployment rates than the countries on this list, the residents of developed nations rely on services from their governments that do not exist in developing nations. Unlike most developing countries, government assistance becomes a costly burden when unemployment rises in developed countries.

Sustained unemployment rates in excess of 10% can be very costly for governments. In 2009, Ireland spent 3.5% of its gross domestic product on unemployment benefits alone, while the United States spent just 0.9% on similar benefits. Making matters worse, as Mark Keese, Organisation for Economic Co-operation and Development’s (OECD) head of employment analysis and policy division explained, “In some countries like Portugal, Spain, and Ireland, social protection is quite well developed and generous. Of course, any increase in unemployment gets translated into large increases in public expenditures, and puts upward pressure on debt.”

Debt as a percent of gross domestic product (GDP) in the countries with the worst unemployment are among the highest in the developed world. In 2012, government debt as a percentage of GDP exceeded 110% in four of the 10 countries with the highest unemployment rates, and six were among the top 20% for debts as a percentage of their GDP out the of the 174 countries measured by the International Monetary Fund (IMF) that year.

However, not all the countries on this list have high debt as a percentage of GDP — evidence of how different levels of government support for the unemployed affect costs. Keese noted that in high unemployment countries like Latvia and Bulgaria, where debt is not as high, those social protection systems are less generous, and so higher unemployment is less likely to translate into debt and poor sovereign debt ratings.

There is increasing pressure on these high unemployment countries by their citizens, international lenders and credit ratings agencies to improve their severe unemployment situation. According to Keese, countries like Spain, Portugal and Greece have enacted reforms of employment protection legislation and wage bargaining reforms, “In an effort to show that they are trying to tackle the structural problems in their economies.”

To determine the countries with the highest unemployment rate, 24/7 Wall St. examined the most recent unemployment rates published by Eurostat, the statistics office of the European Union which tracks European nations, the United States and Japan. Most of these data were for February 2013, and none were from earlier than December 2012. 24/7 Wall St. also reviewed national-level GDP and debt statistics. Most of these data were collected by the IMF through 2011 or 2012, with figures for some nations estimated by the fund. To reflect real changes in output, we reviewed GDP growth figures based on constant prices. We reviewed GDP per capita figures based on purchasing-power-parity to reflect real differences in the spending ability of residents of each nation. Additional figures for government spending on specific social services are from the OECD. Credit ratings were provided by Moody’s Investors Service and are as of April 4, 2013.

These are the countries with the highest unemployment rates.