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Home Publications Blogs Beat the Press Unemployment: The Problem is the Labor Market, not GDP

Unemployment: The Problem is the Labor Market, not GDP

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Wednesday, 19 January 2011 05:10
David Leonhardt has a nice piece pointing out that the difference between the unemployment rate in the United States and most European countries is due to the structure of the labor market, not the rate of GDP. The United States has actually done better in terms of GDP than Germany and most other European countries, yet it has a far worse problem of unemployment. (Germany's unemployment rate is below its pre-recession level.) Germany has encouraged companies to keep workers on working shorter hours. It is also more difficult in general to just lay off workers in Europe. These differences explain the better labor market outcomes in Europe.
Comments (3)Add Comment
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written by Peter K., January 19, 2011 10:05
Great column by Leonhardt.
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written by CathyG, January 20, 2011 12:51
Sounds like a labor policy problem, rather than a labor market problem.
Hourly wage subsidy
written by Floccina, January 20, 2011 5:30
An hourly wage subsidy would be better than making it more difficult in general to just lay off workers.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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