Sunday, February 5, 2012

The value of flexible labor markets

Three stories in the news today highlight the importance of labor market mobility.

The United States has had some good news lately. With job spurt, US economy races ahead of Europe:
Some 1.9 million US jobs have been created in the past five months, bringing the number of people working nearly back to the levels of late 2008.
Jacob Kirkegaard, economist at the Peterson Institute for International Economics, said the latest developments in the labor market show the resilience of the US economic model.
"When you're a US employer, you barely hesitate to hire because you know if you take a worker for a peak in business, you can easily lay off that person if it doesn't turn out as planned," he said.
"In Italy, in Spain, in France, in Greece, the costs for that are high." 
Those high costs are creating problems in Greece. Employed But Not Paid, Some Greeks Voice Protest:
If ALTER TV laid off these workers, the owner would have to pay millions in compensation. Under Greek law, white-collar workers, for example, with 24 years on the job are entitled to 28 months of severance pay.
These days, few employers can afford that, says Vassilis Masselos, a shop owner who has been pressing the government on business reforms.
"It's not a matter of choice, it's a matter of necessity," Masselos says. "They can't find the money to pay employees. They cannot fire them. So they are locked into a sort of limbo that nobody can get out of."
Inflexible labor markets make economic contractions worse, and also slow the pace of recovery. Meanwhile, Canada is offering visas to Indian professionals as their economy improves. Human capital is the largest resource in any economy, so allowing movement toward higher-valued uses is essential for productivity and growth.

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