What Europe can teach us about jobs
By Paul Krugman
Americans have a hard time learning from foreign experience. Our size and the role of English as an international language (which reduces our incentive to learn other tongues) conspire to make us oblivious to alternative ways of living and the possibilities of change.
Our insularity may be especially damaging when it comes to countries with whom we have a lot in common. Western Europe is our technological equal; labor productivity in northern Europe is just a little below productivity here. But Europe’s policies and institutions are very unlike ours, and we could learn a lot by looking at how those differences have played out. Unfortunately, any suggestion that Europe does something we might want to emulate tends to be shouted down with cries of “socialism.”
Which brings me to an under-discussed aspect of the current economic scene: Europe’s comparative success in getting workers idled by the pandemic back into the labor force.
You’re probably aware that the United States is experiencing what many call the Great Resignation — a significant fall in the number of people willing to accept jobs, at least at pre-COVID wages. Four million fewer Americans are employed than were on the eve of the pandemic, yet the rate at which workers are quitting their jobs — usually a good indicator of labor market tightness — has hit a record, and the scramble of employers to find workers has led to rapid wage increases.
Earlier this year, many Republicans insisted that labor was scarce because generous unemployment benefits were discouraging workers from accepting jobs. However, those enhanced benefits went away with no visible effect on participation in the labor force. So what is going on?
Well, a comparison with Europe may shed some light on the subject. For the Great Resignation, it turns out, is largely an American phenomenon. European nations have been much more successful than we have at getting people back to work. In France, in particular, employment and labor force participation are now well above pre-pandemic levels. What explains this difference?
Part of the answer may involve older workers. In the United States, the decline in the labor force has been especially steep among adults over 55, many of whom haven’t come back after pandemic layoffs. This may have been less of a factor in France, where workers tend to retire earlier than their U.S. counterparts. However, older adults in some European nations, like Denmark, are actually more likely to be employed than their American counterparts; yet Denmark has also avoided a Great Resignation.
Another answer may lie in trans-Atlantic differences in how we approached COVID relief. While the United States made some effort to help businesses stay afloat and retain their labor forces, mainly we helped displaced workers through enhanced unemployment benefits. Europe, on the other hand, mainly relied on job retention schemes — government aid intended to keep people on employer payrolls even if they weren’t working at the moment.
The problems with the U.S. approach are now becoming apparent. As I said, there’s no evidence that unemployment insurance has been significantly discouraging work. But where European labor support helped keep workers linked to their old jobs, facilitating a rapid return, U.S. policy allowed many of those links to be severed, making an employment recovery harder.
Finally, let me offer a speculative hypothesis: Perhaps one reason Europeans aren’t engaging in an American-style Great Resignation is that they don’t hate their jobs quite as much.
Anecdotally, one factor behind Americans’ unwillingness to return to their old jobs is that enforced idleness during the pandemic gave many people a chance to reconsider their life choices — and a significant number may have realized that low-paying jobs with lousy working conditions weren’t worth having.
Of course, Europe is by no means a worker’s paradise. But some jobs that are grueling and poorly paid here are less awful on the other side of the Atlantic. Famously, in Denmark McDonald’s pays more than $20 an hour and offers six weeks of paid vacation each year. That may be an exceptional case, but the U.S. does stand out among wealthy countries for having a low minimum wage, for offering very little vacation time and for failing to offer parental and sick leave. Maybe the poor quality of U.S. jobs is one reason so many American workers are reluctant to return.
U.S. elite opinion, especially but not only on the right, has long assumed that making jobs better would backfire, because higher labor costs would reduce employment. But European experience says otherwise. Even before the pandemic, many European countries were doing pretty well at job creation. France, for example, has consistently had higher employment rates among prime-age adults than the United States.
And now, in the aftermath of a nightmarish disruption to working life, pro-worker policies also seem to be helping European economies achieve faster employment recovery than we’re managing here. Are we sure we have nothing to learn from their experience?