NCPA - National Center for Policy Analysis

Trading Places: Employment Up In U.S., Down Abroad

June 29, 1999

Prior to 1984, unemployment in France, Germany and Great Britain was consistently below U.S. rates. But since then, European rates "have consistently been above that of the United States," observes a report from Congress' Joint Economic Committee.

Why has the U.S. done so well in creating jobs, while other countries haven't? Economists Richard K. Vedder and Lowell E. Gallaway, authors of the report, blame foreign countries' higher labor costs.

  • For each worker a firm hires in countries with massive social welfare states, it must pay taxes to support that system in addition to workers' wages.
  • It is no coincidence that the costs of maintaining a welfare state have grown faster in those countries than in the U.S., while unemployment has climbed to double-digit rates there -- 10.5 percent in Germany, 11.3 percent in France, and 12.1 percent in Italy -- even as it has reached a near all-time low of 4.2 percent here.
  • The JEC estimates that if high-tax European countries cut taxes as a share of gross domestic product by 10 percent points, they could cut unemployment by 3 percentage points.

Source: Richard K. Vedder and Lowell E. Gallaway, "Unemployment and Jobs In International Perspective," April 1999, Joint Economic Committee, Washington, D.C.; Macroscope, "America's Job Secret," Investor's Business Daily, June 29, 1999.


Browse more articles on International Issues