European jobs market more flexible than US, says study

Date: 19/07/01

By John Shelley

THE popular perception of an inflexible EU jobs market, overburdened by excessive wage regulations and complex social security systems, is challenged in a new report.

The study was commisioned by social affairs chief Anna Diamantopoulou to compare labour market trends in Europe with those of the US, where employment levels have been consistently higher.

Last year the overall employment rate for the US was 74.1%, compared to 63.3% in the EU.

The researchers, who analysed international data compiled over the past 20 years, made some surprising findings.

In particular, they found that wage levels have fluctuated more in the Union than America and that European economies are more adaptable.

However, it claims that Europe underperforms when it comes to job creation because of problems in specific sectors and a failure to match the high salary levels offered to senior executives in the US.

The report's authors, who focused on Germany, France, the Netherlands and the UK, conclude: "Our analysis of the European employment gap and the earnings mobility record of four European economies relative to the US does not endorse the bleak picture of a sclerotic Europe which fails to match the wage flexibility of the US."

Among their findings was that German, British and Dutch workers enjoy more 'earnings mobility' than the US - while the French are around the same. The proportion of people escaping from low-paid jobs in any one year was found to be very similar across the five economies.

However, the study shows that workers returning from unemployment in Germany, France or the UK have a better chance of catching up with those doing similar jobs when they go back to work than would be the case in the US.

In short, the results of the survey "do not give systematic support to the view of rigid labour markets in European economies inhibiting job growth".

The report highlights the disparity between the EU's success at creating middle-earning jobs, where its employment rates exceed American levels, to its record on creating high-income positions. "Our main recommendation is that it is highly important to focus on the growth of high-wage jobs, and how this can be stimulated," say the report's authors. "This deficit in high-wage jobs applies particularly forcefully in the case of high-wage jobs for women, where the numbers in the EU economies are shamefully low." Finally, the authors question whether a total elimination of the employment gap between the Union and US is desirable, because a "significant" part of it is due to European employees working shorter hours than their American counterparts. "While the employment gap is not universal, and its total elimination not an appropriate objective, a significant jobs deficit undeniably remains and its reduction would bring significant economic and social benefits to the European economies."

The popular perception of an inflexible EU jobs market, overburdened by excessive regulations and complex social security systems, is challenged in a new report. The study was commissioned by social affairs chief Anna Diamantopoulou to compare labour market trends in Europe with those of the US, where employment levels have been consistently higher.