January 19, 2011
David Leonhardt has a nice piece pointing out that the difference between the unemployment rate in the United States and most European countries is due to the structure of the labor market, not the rate of GDP. The United States has actually done better in terms of GDP than Germany and most other European countries, yet it has a far worse problem of unemployment. (Germany’s unemployment rate is below its pre-recession level.) Germany has encouraged companies to keep workers on working shorter hours. It is also more difficult in general to just lay off workers in Europe. These differences explain the better labor market outcomes in Europe.
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