Friday, January 22, 2010

Flexicurity and the Crisis

Nice FT piece today discussing the surprisingly resilient employment performance of European economies such as France, Germany and even the UK, compared with the jobs collapse of the United States (and Ireland and Spain for that matter). The article analyzes the 'weird' dynamics of jobs markets in this recession compared to others, and points out that labour market flexibility - the mantra of reformists everywhere for the past two decades - can accentuate the effects of downturns and destroy more jobs than in more rigid systems. It also reports a change of heart at the OECD where the negative effects of some recent labour market reforms are leading to a marked shift in policy emphasis.

Part of the reason for the UK, France and Germany doing better than the US, Spain and Ireland is the smaller decline in their housing markets. But that doesn't explain the whole story. A separate report today shows that unemployment in Britain is running significantly before the forecast level. It won't save the Labour government, but it indicates the recession could be less damaging for the job market than previous (Tory...) downturns.