What conclusions should the Obama administration draw from Europe’s success with work-sharing measures?
With the US unemployment rate at 10.2 percent, it may be too late to expand "work sharing programs" from the current 17 state-level programs. Government-supported "work sharing programs" similar to those in core Europe work to preserve existing employment rather than to create new jobs. Hence such programs disproportionately benefit skilled workers, whom companies will prefer to "hoard," as they are more likely to find employment elsewhere if laid off. This type of insider-outsider dynamic has been very prevalent in Europe during the crisis, where increases in unemployment despite work sharing programs have been heavily concentrated among people on temporary work contracts. Additional protection for "insiders" is clearly not what the US labor market needs at the moment.
Instead, in the short term, Congress should implement a temporary holiday for Social Security and Medicare payroll taxes for new hires. This could provide an urgently needed, powerful broad-based and immediately implementable job creation stimulus for the US labor market.
Saturday, December 5, 2009
Kurzarbeit or Trojan Horse?
Jacob Funk Kirkegaard for the Peterson Institute for International Economics raises an interesting objection to emulating European Kurzarbeit programs. Considering the Peter G. Peterson connection, Kirkegaard's recommended short term remedy might set off a few alarm bells among the "don't touch Social Security, it's not broken" crowd (but see also Bartik and Bishop at the EPI):