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Employment

Credit America's Entrepreneurial Spirit For Low Unemployment

The vitality of America's small- and medium-size businesses is one reason the U.S. unemployment rate is as much as one-third or one-quarter that of some European countries, according to a new study by Princeton University labor economist Alan Krueger and Jorn-Steffen Pischke of the Massachusetts Institute of Technology. The economists suggest that: Jobs are created in Europe from the top down as big businesses and big government mobilize scarce capital and expand production capacity. In America, where virtually all employment growth in the past decade has come from small- and medium-size service businesses, the key to expansion has been individual enterprise. Shops and small businesses in the U.S. are less likely to be hemmed in by regulations -- such as zoning, licensing, hours of operation -- and stultifying union demands. Venture capital is easier to obtain in America, and banks and specialty lenders are more likely to provide credit for businesses with strong track records. They observe that entrepreneurs aren't honored in European cultures as they are in America. Such cultural differences may explain, in part, why unemployment rates are 12.6 percent in France, 19.9 percent in Spain and 10.9 percent in Sweden -- while Americans enjoy an unemployment rate of 4.9 percent and employers here frantically search for skilled workers. Source: Peter Passell, "A New Look at Why the U.S. Outdoes Europe in Job Creation," New York Times, October 16, 1997.

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