Thursday, February 15, 2007

Recipe for Low Unemployment Not Complicated


From today's WSJ:

Europe just got its best jobless report in a very long time. The bad news: In a decade when record numbers of people found work in the rich world, Europe's best is an unemployment rate of 7.5%, significantly higher than America's 4.6% or that of any other developed economy.

The Old World offers a useful model of what not to do. Its largest economies -- Germany, France and Italy -- have shunned a policy mix that has enabled English-speaking and Nordic countries to reduce their jobless rolls.


Rigid job protection laws have the perverse effect of keeping people out of work. Germany and France are generous with benefits, lax about getting the unemployed off the dole and inflexible on hiring and firing. Such laws discourage companies from hiring and they discriminate against the jobless by raising the bar to enter the workforce; women and minorities are disproportionately hit.

The recipe isn't complicated: Reduce taxes to reduce wage costs, tighten rules on government benefits, loosen up employment protection laws.

MP: In Europe, a 7.5% unemployment is celebrated as the best unemployment rate in a decade. In the U.S. a 6% unemployment in 2002-2003 was dismissed by the media as a "jobless recovery." With an jobless rate of Michigan's just slightly above 7%, it's called a "single state recession."

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