Unemployment is measured by Eurostat in a consistent way cross the countries in the European Union through the EU Labour Force Survey (EU-LFS). In the survey the population (15 years and above) are divided into three mutually exclusive and collectively exhaustive groups: persons in employment, unemployed persons and inactive persons (for definitions of the different groups, please see below).

Current average on 10,8%

Unemployment was in average 10,8% in EU (28 countries) 2013. However spread between the different countries is significant where countries such as UK (7,6%), Sweden (8%) and Norway (3,5%) for instance comes in below the average while countries such as Portugal (16,4%), Spain (26,1%) and Greece (27,5%) comes in clearly above the average.

It is easy to realize that unemployment comes with a significant cost for the different countries, more specifically in terms of payouts from the social security system in each of the countries.

The hidden cost

However, there is another cost of unemployment that we need to recognize and reflect on. A cost that potentially is somewhat more hidden compared to the direct costs identified. As unemployment actually means that people are not allowed to productively contribute to the GDP in a country, it actually means that this is a loss of productivity for the whole country. In other words, we are not fully utilizing the capacity at hand, which in turn need to be looked upon as a failure for the society as a whole, rather than for the individuals.

As a simple way of calculating and quantifying this hidden cost we put together two different scenarios. First scenario quantifies the opportunity in reducing unemployment to zero, so basically eradicating unemployment. Of course this is an aggressive scenario, we recognize that, hence a second scenario. The second scenario assumes that any country in the European Union has a maximum of 10% unemployment, consequently meaning a decrease for countries currently above that level (e.g. Portugal and Greece), but no change for countries below that threshold (e.g. Norway and UK). In both scenarios we assume that people returning to employment would not decrease the average GDP per capita in each country.

Between 1 600 and 300 BEUR

The first, and most aggressive, scenario indicates that the total cost of unemployment through lost GDP adds up to incredible 1 600 Billion Euro. Spain alone in this scenario corresponds to GDP loss of 360 Billion Euro, France 236, Italy 217, UK 156 and Germany 150.

In the second scenario, assuming a maximum unemployment of 10% in any country, the total cost of unemployment as measured through lost GDP is 344 Billion Euro. In this scenario countries like UK and Germany lands on zero Euro lost, while Spain alone loses 223 Billion Euro, Greece 44, Italy 39 and Portugal 13.

A call for action

Whatever you believe in terms of optimal rate of unemployment, working forcefully to make it decrease clearly has the potential to significantly impact the economies of the countries in the European Union, 300 Billion Euro is at stake if we manage to reach a situation with maximum unemployment rates of 10%.

The big question is of course how this can be done. While we are convinced that political means need to be leveraged to create the pre-requisites, new tangible and real jobs need to be created in order to have a positive impact of unemployment, and new jobs need to be created through the companies that operate in the region, a clear call for action!

Source: Eurostat

Definition of employed persons and unemployed persons

Employed persons are persons aged 15 years and over who, during the reference week performed work, even for just one hour a week, for pay, profit or family gain or who were not at work but had a job or business from which they were temporarily absent because of something like, illness, holiday, industrial dispute or education and training.

Unemployed persons are persons aged 15-74 who were without work during the reference week, but who are currently available for work and were either actively seeking work in the past four weeks or had already found a job to start within the next three months.

Government income mainly comes from taxes, and in this brief assessment we only looked as social security taxers, personal taxes and sales taxes (VAT). By assessing the different taxes individually it is also possible to assess the total tax pressure in each country. When doing that we made the simple assumption that all of the available net income was consumed, i.e. sales taxes applied to. Interestingly enough it turns out that there is a great spread in the total taxes, from low 30 to above 70%. This means in reality that if the employee cost for a company is 100 and the total tax rate is above 70, then the employee in reality receives a purchasing power of less than 30, the rest is taxes.

Finally we assessed the correlation between taxes and debt. Logically we wanted to understand whether taxes was used as a mean for reducing need for debt or if low taxes necessarily lead to higher government debts. It turns out that correlation between total taxes and debt is very weak, if anything there is a weak positive correlation, meaning that governments seem to increase taxes as a mean of trying to reduce government debts. This is however not true for all of the countries, e.g. US with a debt to GDP above 100 still enjoys low total tax rate of somewhat more than 40% while Sweden with low debt to GDP of somewhat more than 40% still have one of the highest total taxes of above 70%.

Have a look at the graphs below for further insights, note it is possible to interact with the graphs. Click on the different headings to see the different graphs.

Source: tradingeconomics.com

If we look specifically at the start-up funding activities in US it is clear that the major part of the activity is around two cities specifically; San Francisco on the West coast and New York on the East coast. While there of course are activities in between, it is remarkably concentrated to these two cities. Biotechnology is clearly the largest vertical when it comes to start-up activities, both when measuring # of rounds, total funds raised and average funding / round. Interestingly enough the funding activities in Biotechnology seem to be somewhat more evenly spread in the country.

Another interesting observation is that if you single out companies with funding activities that eventually have been acquired, those are not primarily found in Biotechnology, but rather in the Software vertical.

Finally while Biotechnology seem to be the vertical with some heavy activities around start-up funding, it is also apparent that while number of rounds is significantly smaller the total funds raised and the average funding per round is significant also in Mobile and Clean Tech.

Go ahead and play around with the dataset yourself in the graph below; try for instance what happens if you only select cases between 1900 and 1950; how does that change the overall picture?

Source: CrunchBase

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Below also the original graph which gives you an opportunity to also check out the historical distribution of GDP in Europe.

Source: Eurostat, Millions of Euro at Current prices

We have previously published a full article with the survey results based on responses coming in during 2012 and through this new post we would like to provide some brief updates on the additional responses that we have received.

The overarching conclusions is clear: There is great lost opportunity hidden behind the topic of business strategy, i.e. there is a great gap between potential of strategy and the actual benefit gained today.

Through the strategy survey it is clear that there is a great belief in the power of strategy, 89% of the respondents believe that strategy can have a significant impact on the company’s ability to achieve profitable growth; this is clearly demonstrating the potential of  business strategy. Unfortunately only 21% of the respondents believe that the concept of strategy is clearly and consistently defined. Here is were we start to see the value gap.

Furthermore, through the questions asked in the survey it is also clear that the definition of strategy is not the only issue that business executives are faced with. In fact the most common issue as identified by executives answering the survey is the implementation of the strategy, 70% of the respondents believed that to be one of the key challenges with strategy.

All of the challenges expressed from executives working with business strategy is translated in to a lost business opportunity, i.e. realising that great opportunity effectively working with strategy to achieve profitable growth.

Only 27% of the respondents believe there own company has a clearly defined strategy. 20% of the respondents believe their company’s strategy clearly articulates a competitive advantage, 31% believe their strategy can articulate the targeted customers and markets, 33% of the respondents believe their strategy clearly defines the products and services that the company brings to the market and 29% of the respondents believe their own strategy clearly articulates the business model they have chosen. Of course, in order for us to be able to say that company’s today have an ability to fully leverage the potential of business strategy, the share of executives that agree to these simple statements need to be much higher. Consequently, the overarching conclusion from this strategy survey update is that we see a great value gap between the potential identified with business strategy and the actual value we today manage to extract.

Based on this basic definition of the key dimension in a business strategy we went through all of the publicly listed large cap companies on OMX/NASDAQ to see whether they had clearly defined these dimensions. Some of the companies of course choose not to communicate their strategy externally at all, which of course is perfectly acceptable. The assessment, and the statistics below, is only based on the companies that actually choose to communicate their business strategy externally.

36% of the companies that communicated their strategy externally did not adress any of the four different key dimensions in a business strategy, and only 7% of the companies managed to articulate all of the four different dimensions.

Furthermore, we also assessed the differences between different verticals. Turns out that there are some great differences between the different verticals, where the companies classified as telecommunication companies came out as best in class. Interesting also to notice that there were some great differences between the four different dimensions where clearly most of the companies had missed the opportunity to articulate their business model.