by Jerome a Paris
Thu Aug 11th, 2005 at 06:18:21 PM EST
UPDATE an extended version of this post, incorporating some of the data in the comments, is now posted on DailyKos with credits to all!
What US labour laws can teach Europe
Over the past decade, European employment has grown by less than 10 per cent, while US employment has grown by 17 per cent, creating more than 2.2m jobs last year alone.
America grows while Europe stalls for many reasons, among them disparities in flexibility caused by employment laws. Europe will never recover until employment protection statutes are modernised and politicians restore flexibility to employers and workers.
The unsung story behind US job creation is the flexibility and turnover in American labour markets, which boost employment. Frequent job changes lead to better job matches and higher productivity. In 2004 there were 54m new hires and 51m job separations in a labour force of 147m. Over half these separations were voluntary – people who left jobs because of better opportunities. Younger baby boomers, born in 1957-1964, held an average of 9.6 jobs from age 18 to 36. This turnover is a leading cause of job creation.
The writer, [Diana Furchtgott-Roth] a senior fellow and director of the Center for Employment Policy at the Hudson Institute, was chief economist at the US Department of Labor 2003-5
(...) countries with fewer employment protection laws have greater growth in employment and economic activity. Laws put into place with the best of intentions for job protection result in job destruction.
Ricardo Caballero, a professor at MIT (...) found that the links between hiring and economic growth are slower in countries with high legal protection against dismissal, especially where such protection was enforced.
This makes intuitive sense. When employers cannot fire workers easily, as is the case in the European Union, they hire fewer of them when economic growth picks up. When the cost of European mandatory benefits, such as paid maternity leave and long vacations, is added to the difficulty of firing, slow job growth becomes inevitable. Countries with high employment-protection legislation and less turnover have more long-term unemployment.
Another disadvantage of inflexible labour markets is that they encourage older people to retire early. (...) Owing to flexible employment laws, a higher percentage of American older citizens work than in many other industrialised countries. In 2003, 14 per cent of Americans 65 and older remained economically active. (...)
In sum, a comparison of US data with countries that have enacted so-called job protection laws shows that these laws increase unemployment, deter the shift of workers from unproductive to productive jobs and discourage the elderly from working. It is ironic that America’s supposedly more porous safety net provides more job security than Europe’s rigid labour laws.
I'd like to use this thread to collect some data on the items like the following:
- when a big company fires a big chunk of its work force, how much time does it take in the US and in Europe? I.e. how flexible really are the various labor markets.
- is the only kind of "flexibility" that matters that of firing people? What else can you want from your workforce?
- how do we define "job security"?
- how desirable is it to work when you are 65 or more, from the point of view of society?
- how many ways to tweak statistics did you count in the parts of the article I quoted?
Have at it!