Futility Of "Make-Work" Programs In Europe
July 7, 1997
In the eyes of many U.S. economists, European leaders never seem to get it right. One case in point is the promise of French socialists to create jobs by slowing down privatization and mandating a 35 hour or less work-week -- an admission that they can't create jobs, so they'll spread what work there is around.
A recent study by Yale University economist Jennifer Hunt examines German efforts over the past decade to create jobs through make-work programs. She finds that reducing the standard work-week may have reduced overall employment by raising the cost of labor.
While some European technophobes blame high unemployment on the growing use of computers and other advanced technologies, the real problem is interventions in the labor market that discourage companies from hiring workers.
- These include very high social security and other taxes on labor, generous subsidies to the jobless which discourage them from looking for work, and regulations that raise the difficulty and cost of hiring and firing workers.
- Many regulations also discourage entrepreneurs from starting up enterprises -- a factor which has been important to job creation in the U.S.
- Western Europe, which has experienced no net increase in private employment since the middle of the 1970s, might want to take a look at Britain's program of lowering labor taxes and regulations -- which ultimately reduced unemployment there to under 6 percent.
Source: Gary S. Becker (Nobel Prize winner, University of Chicago), "Don't Blame High Tech for Europe's Job Woes," Business Week, July 7, 1997.
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