Fri Sep 22nd, 2006 at 07:21:09 AM EST
This won't come as a surprise to those who follow the economic debates here, but a new policy brief from the Center for Economic and Policy Research provides some good news about those allegedly rigid European labor markets (figures exclusive to ET):
***from the front page, with a paragraph put below the fold. - Jérôme
Old Europe Goes to Work: Rising Employment Rates in the European Union by John Schmitt and Dean Baker
Europe has made remarkable progress closing the employment gap over the 2000s. In 2000, the overall employment rate in the United States was five full percentage points higher than the corresponding rate in Europe. By 2005, the combined effect of a fall in the U.S. employment rate and a rise in the European employment rate reduced the gap to just 1.1 percentage points. . . . Europe made particular progress closing the employment gap for women . . .
Here's some more country-specific information from the brief:
Even France has a higher proportion of its prime-age labor force working than does the United States right now.
Although much of the remaining employment gap between the US and Europe is due to lower employment to population ratios for women (especially in conservative, Mediterranean Italy and Spain), many European economies have seen big increases in female labor force participation:
The brief also acknowledges the wonders of "flexisecurity":
. . . by far the best performers have been . . . three small economies . . . Denmark, the Netherlands, and Sweden. Compared to the United States, these three economies have much more established welfare-state institutions, including substantial taxation, generous unemployment benefits and other income supports, employment protection legislation, and strong unions. All three countries also have substantially stronger welfare-state features than Italy, Spain, and the United Kingdom, and arguably stronger than France and Germany.
Those three best performers have also gone further with labor market deregulation than France, Germany, or Spain:
OECD Employment Protection Index
Sweden 55 55
Denmark 35 35
Netherlands 55 55
UK 18 19
France 70 73
United States 5 5
Germany 65 63
Spain 70 72
Italy 75 58
100 = "highly regulated"
Italy has enjoyed substantial employment growth along with labor market deregulation. Nobody else is anywhere near the US and UK, however, in terms of deregulated labor markets. France, Germany, and Spain could probably do with more reforms (leavened, of course, by measures like, say, more spending on direct public sector job creation or active labor market policies to ease any increased worker insecurity).
At the risk of becoming repetitive, though, the general lesson is reaffirmed: it is quite possible to combine substantial levels of labor market protections and generous welfare states with good employment performance.
PS -- the data cited in the brief do not include the young (age 15 to 25) and the old (age 55 to 64), groups that often are said to bear the brunt of rigid labor markets. On his website, Baker points out that low employment rates for students and older workers represent explicit policy choices (low college tuition and stipends, lower retirement ages. etc) as much as labor market failures.