Saturday, May 23, 2009

Unemployment

John Quiggin compares US and EU unemployment:

According to the latest data, the unemployment rate in the US was equal to that in the EU-15 in March, and is now likely to be higher. Writing in the NY Times, Floyd Norris refers to the conventional wisdom that flexibility inherent in the American system — it is easier to both hire and fire workers than in many European countries implies that unemployment should be lower (at any given point in the business cycle) in the US than in Europe.

Although this is the conventional wisdom, the research on which it was based (by Lazear and others) has long since been qualified or refuted. I looked at this in the context of the Australian debate about unfair dismissal laws a few years back. Although the early research supported the simple view that more flexibility = more jobs, later research yielded the conclusion that employment protection laws lower the variance of employment and unemployment but have no clear effect on the average levels.

1 comment:

bert said...

I commented on that post with a French example, which reads in part:

How about what we’ve seen recently in France: the self-protective strikes by public sector and other favoured workers, in parallel with the far more self-destructive riots by the “racaille” in the banlieues. The first group are very much an insider class, and boast a string of prime ministerial scalps. The second are marginalised socially and geographically, with youth unemployment rates at or above one in four.

I’d argue that French labour laws show up in the figures whatever point of the cycle you’re at. Why else would you consistently find France at the top end of the productivity tables? It’s not because they’re worker ants – they’ll proudly tell you that themselves. It’s because French capitialism results in a mix of factors of production that’s comparatively light on labour.
In response Quiggin cuffed me with the back of his hand. Its possible that's deserved, for all kinds of reasons, some of them karmic. I don't know if you have a view.

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By the way, can I echo the comments on the Two Years thread. Blogging is a marathon, and often a slog (I know myself well enough to stick to commenting). I admire your commitment, enjoy your writing, read you regularly and wish you a joyeuse anniversaire.