Discussion 3 Gov Policy - Article

Discussion 3 Gov Policy - Article - Economics focus Pay for...

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Economics focus Pay for delay Wage subsidies and fatter jobless benefits have softened the impact of the recession but may yet hurt recovery Nov 5th 2009 AMERICA may lead the rich world in periods of prosperity, but Europe has shown a greater talent for dealing with recession. Unemployment in the euro area has risen by 30% from its pre-crisis levels. America’s jobless rate has more than doubled. In Germany, the largest country in the euro zone, output fell far harder than America’s during the worst months of the crisis but Germany’s unemployment rate barely rose. Consumer spending has held up surprisingly well in a country where high saving is the norm even in good times. “Germany is calm,” says one official with satisfaction. By comparison, America is deeply troubled. What explains the resilience of continental Europe? Some of it was already built-in. Job-protection laws make it costly for firms to lay off workers, and where posts are sacrificed, the newly unemployed are preserved from penury. They receive benefits worth around two-thirds of their lost salaries in most countries. Only in Italy are benefits anywhere near as skimpy as in America and Britain, where new claimants receive just 28% of their previous earnings. European governments also have fewer qualms about intervention. A new report from the OECD identifies 14 kinds of job-market initiatives put in place since recession struck. France ticks 12 of those boxes, more than any other country. One policy in particular has helped keep a lid on unemployment. Schemes that subsidise the
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This note was uploaded on 12/06/2010 for the course ECON 4616 taught by Professor Antman during the Fall '08 term at Colorado.

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Discussion 3 Gov Policy - Article - Economics focus Pay for...

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