VIENNA — Walking through the beautiful and bustling streets of central Vienna, one finds it hard to imagine that elsewhere in Europe thousands of demonstrators are taking to other streets to protest crippling unemployment and the imposition of punishing austerity measures. This is particularly true in Greece and Spain, where one in four people is out of a job, and one in two of those under 25. For the European Union's 27 countries, the unemployment rate is now 10.6 percent -- and it's even higher for the eurozone countries, at 11.6 percent. Worse, the trend is negative: Both rates have "risen significantly" according to Eurostat, from 9.8 percent and 10.3 percent, respectively, the previous year.
In Austria, however, the rate is just 4.4 percent, up slightly from a year ago but persistently the EU's lowest unemployment level. This is also a country whose tourism industry seems recession-proof and whose capital city of Vienna is repeatedly ranked No. 1 on Mercer's Quality of Living index. It's an enviable record, to be sure, and one that seems counterintuitive in the context of a slumping global economy, regionwide pressures, and a common currency on the verge of collapse.
What is Austria's secret?
The answer lies in a system of economic and employment policies built on a central commitment to social market economics, where individual and corporate prosperity depend on general prosperity in a tapestry of interdependent interests. These assumptions are played out, at least in part, through a "social partnership" system of representatives from labor, industry, government, and often academia, in which job security, wages, pensions, unemployment insurance, and other workplace standards, as well as related legal and policy questions, are discussed and negotiated, leading to recommendations to Parliament and the respective ministries.
At the same time, Austria has a productive and highly competitive manufacturing sector, which accounts for the country's favorable trade balance. In a country with generally good secondary schools and effectively free higher education, the economy enjoys a well-educated workforce and stable relations between management and labor within the social-partnership system that allow for long-term planning. Austria also has an excellent medical system, ranked among the world's best, and a varied and flexible national health-care system supported by all participants.
Austria is a wealthy country, both publicly and privately, with comfortable levels of household income (31,125 euros median) and a sustained and relatively high level of private savings, with private wealth nearly six times higher than public debt. Although the distribution of income and wealth is increasingly uneven by Austrian standards, it is still relatively narrow, and the high levels of private wealth lubricate the pipelines of both private and public investing.
Austrians are also big savers, stashing away things like commemorative gold coins from the Austrian Mint. And though individuals and households are saving somewhat less than before (7.5 percent of annual income in 2011, compared with 8.3 percent in 2010), it doesn't appear to be affecting consumption. Statistics Austria reports that household disposable income increased 2.6 percent for the same period, and household consumption, up 3.5 percent, by even more.