Much of Europe remains plagued by high levels of unemployment. Fighting Unemployment critically assesses the widely accepted view that the culprit is excessive labor market regulation and overly generous welfare state benefits. The chapters include both cross-country statistical analyses and country case studies and are authored by economists from seven North American and European countries. They challenge the standard free market prescription that lower wages for less skilled workers, weaker labor unions, greater decentralization in bargaining, less generous unemployment benefits, and much le ... More

Much of Europe remains plagued by high levels of unemployment. Fighting Unemployment critically assesses the widely accepted view that the culprit is excessive labor market regulation and overly generous welfare state benefits. The chapters include both cross-country statistical analyses and country case studies and are authored by economists from seven North American and European countries. They challenge the standard free market prescription that lower wages for less skilled workers, weaker labor unions, greater decentralization in bargaining, less generous unemployment benefits, and much less job security are necessary for good employment performance. There is little or no evidence of an equality-employment tradeoff: more wage equality is not associated with higher unemployment (or lower employment) rates. And while some recent statistical tests of the role of protective labor market institutions across the most affluent countries have been interpreted to lend support to the orthodox view and have been highly influential in both professional and policy circles, these results are shown to vary significantly across studies and to be highly sensitive to minor changes in the way the tests are run. The case study chapters suggest that good employment performance has been achieved less by shrinking the welfare state and deregulating the labor market than by effectively coordinating macroeconomic and social policies with the wage bargaining system —an achievement that requires both strong employer and union associations and a relatively stable and consensual political environment. The larger message of this book is that fundamentally different labor market models are compatible with low unemployment, ranging from the free market “American Model” to the much more regulated and coordinated Scandinavian systems.