Opinion – Paul Krugman: What Europe can teach us about work

Americans have a hard time learning from experience. Our dimensions and the role of English as an international language (which reduces our incentive to learn other languages) conspire to make us forget about alternative ways of life and the possibilities for change.

Our insularity can be especially harmful when it comes to countries with which we have a lot in common. Western Europe is our technological equivalent; labor productivity in Northern Europe is only slightly lower than that of the United States.

But European policies and institutions are very different from ours, and we could learn a lot by examining how these differences manifested themselves. Unfortunately, any suggestion that Europe does something we could imitate tends to be greeted with cries of “socialism.”

Which brings me to a little-discussed aspect of the current economic landscape: Europe’s comparative success in getting workers displaced by the pandemic back into the workforce.

You probably know that the United States is experiencing what many call the Great Resignation — a significant drop in the number of people willing to take jobs, at least on pre-Covid wages.

Four million fewer Americans are employed than on the eve of the pandemic, but the rate at which workers are leaving their jobs—generally a good indicator of the tightness in the labor market—has hit a record, and employers have struggled to find workers led to rapid increases in wages.

Earlier this year, many Republicans insisted labor was in short supply because generous unemployment benefits were discouraging workers from taking jobs. However, these increased benefits went away without a visible effect on labor force participation. So, what is happening?

Well, a comparison with Europe might clarify the matter. For the great resignation, after all, is primarily an American phenomenon. European countries have been much more successful than us in getting people back to work. In France, in particular, employment and labor force participation are now well above pre-pandemic levels. What explains this difference?

Part of the answer may involve older workers. In the United States, the decline in the workforce was especially pronounced among adults over 55, many of whom did not return after the pandemic layoffs. This factor was perhaps less important in France, where workers tend to retire earlier than their American counterparts.

However, older adults in some European countries, such as Denmark, are actually more likely to be employed than their American counterparts; but Denmark also avoided a Great Resignation.

Another answer may lie in transatlantic differences in how we approach helping Covid. While the US has made some effort to help companies stay afloat and conserve their workforces, we mostly help displaced workers with higher unemployment benefits.

Europe, on the other hand, relied primarily on job retention schemes — government help designed to keep people on employers’ payrolls, even if they weren’t currently working.

The problems with the American approach are now becoming apparent. As I said, there is no evidence that unemployment insurance significantly discouraged work. But while support for the European workforce has helped keep workers tied to their old jobs, facilitating a quick return, US policy has allowed many of those links to be severed, hampering a job recovery.

Finally, let me offer a speculative hypothesis: perhaps one reason Europeans aren’t engaging in an American-style Great Resignation is that they don’t hate their jobs so much.

In an anecdotal view, one factor behind Americans’ unwillingness to return to their old jobs is that mandatory rest during the pandemic gave many people an opportunity to reconsider their life choices — and a significant number may have realized that low-paying jobs and poor working conditions weren’t worth it.

Of course, Europe is by no means a workers’ paradise. But some jobs that are tiring and low-paying here are less horrible across the Atlantic. In Denmark, McDonald’s pays more than $20 an hour and offers six weeks of paid vacation a year.

This may be an exceptional case, but the US stands out among rich countries for having a low minimum wage, offering little vacation time, and not offering paternity and sick leave. Perhaps the poor quality of jobs is one reason why so many American workers are hesitant to return.

The opinion of the US elite, especially, but not just the right-wing, has long assumed that improving jobs would be counterproductive, because higher labor costs would reduce employment. But the European experience says otherwise. Even before the pandemic, many European countries did very well in creating jobs; France, for example, has consistently had higher employment rates among working-age adults than the United States.

And now, after the nightmare of the interruption of productive life, pro-worker policies also seem to be helping European economies to achieve a faster employment recovery than we are achieving here. Are we sure there is nothing to learn from their experience?

Translated by Luiz Roberto M. Gonçalves