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4Labor market policies:historical and comparative

perspectives

Philippe Askenazy (Paris School of Economics)

www.jourdan.ens.fr/~askenazy/laborpolicy.htm

Updated slides!

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Outline of the courses

03/15, 9.15-12.15: 2000’s. Old tools or new tools? Minimum wages versus in-depth liberalization

A comparative perspective: current policies

03/22, 9.15-12.15: Comparative methodology

03/29, 9.15-12.15: Scandinavian countries, Germany, UK, US. 3 presentations (Sweden, Germany, US)

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Outline of the courses

04/05, 9.15-12.15: Labor policies in developing countries. 2 presentations (India, South-American)

04/26, 9.15-12.15: The coordination of European labor policies; the labor policies in the current crises. 2 presentations (OECD and EU strategies)

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“Euro zone”: 1987-1990 a new Phillips curve?

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1988-1990

NO e.g. the proportion in Europe of long term unemployed remained high

Decline of short and long-term unemployment in Europe End of stagflation: low persistent inflation rate

End of hysteresis?

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1991 the end of a short-cycle

Short recession in the US but Deeper recession in Europe Rise of unemployment, especially in Scandinavian countries (why ?)

German reunification: a positive demand shock and a negative monetary shock

End of the Cold War but the first Gulf war

new tensions on oil/gaz market

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Harmonized unemployment rate 1988-1994

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But US “new economy”: an idea from entrepreneurs (not economists)

Clinton 1993:

- massive public support to ICT infrastructures

- from military R&D to mixed R&D

+ Generalization of innovative work practices

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US “new economy”: a productivity resurgence

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US growth decomposition (Jorgenson-Stiroh)

Productivity growth + digitalized economy = rapid growth without inflationist tensions + unemployment drop

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US “new economy”

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US were not an exception

Ex: Finland, also, followed the “entrepreneurs”

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Who followed the economists? France!

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Ideas from economists in 1991

The “revenge” of the histeresis but no view of the “new economy”!

Necessity to build a new labor policy from the consensus of economists ~ Washington consensus for developing countries

In France: the Commissariat Général au Plan (Charpin/Brunhes)

International: The OECD Job Study

transatlantic consensus: same structural changes i.e. globalization and biased technological progress. Why ? But different institutions

higher wage inequality in the US versus low-skilled unemployment in Europe

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Economic ideas born in 1991-1994

Assumption: unemployment is a sharper inequality that wage inequality

Reduce labor market rigidities: simplified firing for increasing the propensity to hire; simplified hiring

Activate passive labor policies: lower unemployment benefits associated with “accompaniment” + sanctions

Reduce the social-fiscal corner and/or minimum wages

Evaluate labor market policy tools with new econometric methods: matching, propensity score… (Heckman)

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Ex: French new labor policy 1991-1997

1991-1993: “enrich the labor content of growth” through niche job markets

Income tax cuts for households that employ personal workers Immediately increased by 100.000 the number of personal workers: formerly undeclared jobs?

Social tax cuts for part-time jobs

?

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Ex: French new labor policy 1991-1997

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Ex: French new labor policy 1991-1997

1993-1997: “enrich the labor content” of growth through social tax cuts for low-wage workers

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Ex: French new labor policy 1991-1997

Controversial evaluations: why?

Juppé social tax cuts: 100,000 to 600,000 job creations. “consensus” of administrations: about 300,000 jobs

The share of low-skilled jobs re-increased!

But costly: about 7-8 billions current euros…

And alsoFinancial support for apprenticeship rapid development… for tertiary education: substitution? Robien 1996: massive social tax cuts for shorter working time => favor the socialist idea of the 35-hour workweek

Aborted “SMIC jeune”

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France: 1997-2000

The surprising dissolution of the Parliament and the return of a socialist government (green-communist-socialist)

=> Enrich the job content of growth through sharing labor and public jobs

Analysis: 1. slow growth recovery… (while US, Nordic countries massively invested in the knowledge economy)2.bargained reduction of working time in most continental European countries except in France

Youth employment: stock of about 200,000 workers on 5-year contracts paid at the minimum wage, mainly as assistants in schools

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The Aubry laws

Impacts?

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Exceptional job creations for France

300,000 Juppé + 300,000 Aubry

1998,1999 and 2000 = the first, second, and fourth best years for job creations during the century in France

But still high unemployment in 20008.6% 16.6% for the 15-24 10% for women about 40% of long-term unemployed

… in France but also in Europe!

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2000 Euro zone”: still high unemployment