“The US Labor Market is Not Working;” Antonio Fatas “On the Global Front”

This particular post was first picked up at Economist’s View and fits with Sandwichman’s posts on Labor. I have been watching Participation Rate in conjunction with U3 since 2001 along with others such as Laurent Guerby and while the US has decreased in the numbers of people in the Civilian Labor Force, our counterparts in Europe have seen increased numbers in the Civilian Labor Force. Krugman makes a statement “even the French Work harder than the Americans” which to me is rather bizarre given the French have a shorter work week and more time off than the American Labor Force. Perhaps it has nothing to do with working harder? We might find the reasons for an increased Civilian Labor Force in working smarter and more efficiently during a shorter work week. I think Krugman and the proponents of the 40+ hour work week tend to forget, it is all about throughput and efficiency and not about Labor as the latter can allow greater Labor participation. I find the comparison of the US to other countries interesting in that the other countries and associated appear to allow the citizenry to be more productive than the US by keeping more of them employed and working shorter hours. Maybe in the US we are just too militant for higher wages and time off???

Anyhoo, here the post by Antonio Fatas as taken from his blog “On The Global Front.” Antonio is certainly qualified to make such an analysis as he is on the Portuguese Council Chaired Professor of European Studies and Professor of Economics at INSEAD. INSEAD is a business school with campuses in Singapore and Fontainebleau (France). Antonio is a Senior Policy Scholar at the Center for Business and Public Policy at the McDonough School of Business (Georgetown University, USA) and a Research Fellow at the Center for Economic Policy Research (London, UK). His charts certainly provoke discussion as to what we in the US “are doing wrong.”

 

“In a recent post Paul Krugman looks at the dismal performance of US labor markets over the last decade. To make his point, he compares the employment to population ratio for all individuals aged 25-54 for the US and France. The punch line: even the French work harder than the Americans! And this is indeed a new phenomenon, it was not like that 13 years ago [Just to be clear, there are other dimensions where the French are not working as hard: they retire earlier, they take longer vacations,... but the behavior of the 25-54 year old population is indeed a strong indicator of how a society engages its citizens in the labor market. ]

So are the French the exception? Not quite. Among OECD economies, the US stands towards the bottom of the table when it comes to employment to population ratio for this cohort (#24 out of 34 countries).

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What is interesting is that most of the countries of the top of the list are countries with a large welfare state and very high taxes (including on labor). So the negative correlation between the welfare state and taxes and the ability to motivate people to work (and create jobs) that some bring back all the time does not seem to be present in the data.

What is interesting is that the US looked much better 13 years ago (see numbers for 2000 below, the US was 10 out of 34).

The US has gone through a major crisis after 2008 with devastating effects on the labor market but so have other countries. In fact, most European countries have done much worse than the US in terms of GDP growth during the last 6 years. In fact, with the exception of Portugal, Greece and Ireland, the US is the country with the worst labor market record for this age group if we compare the 2012 to the 2000 figures.”

Hat Tip to: Economists View

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