8/12/2005

Daily Kos: Debunking Busheconomics

Debunking Busheconomics
by Jerome a Paris [Subscribe]
Fri Aug 12th, 2005 at 05:43:05 CDT

The Financial Times publishes this morning the straight propaganda from the "voodoo" supply siders that fill up so many positions in the Bush administration. It is interesting to see their arguments so nakedly expressed:


What US labour laws can teach Europe

Over the past decade, European employment has grown by less than 10 per cent, while US employment has grown by 17 per cent, creating more than 2.2m jobs last year alone.

(...)

America grows while Europe stalls for many reasons, among them disparities in flexibility caused by employment laws. Europe will never recover until employment protection statutes are modernised and politicians restore flexibility to employers and workers.

Below, a thorough debunking (with the help of afew, Colman and DoDo in the original European Tribune thread). all quotes below from the above article, unless specified.

* Jerome a Paris's diary :: ::
*


Over the past decade, European employment has grown by less than 10 per cent, while US employment has grown by 17 per cent, creating more than 2.2m jobs last year alone.

Of course, that number is pretty meaningless if you don't take into account changes in the working age population in the meantime.

First, population growth. In the EU-15, it was a bit above 3%, whereas in the US it was just below 13%. That means that relative job creation was 6-7% in the EU vs. 3-4% in the US. Europe created more jobs, relative to its population!

It you try to evaluate working age population, the current number for the US is that it is estimated at 150,000 per month, or 1.8 million per year, or 1-1.5% per year. Again, 17% more jobs over 10 years means that over the period, the US have created just enough jobs for its growing population - and ALL of these job creations were during the first 5 years, under Clinton.

The US number for the past year (the only good year for Bush on that front in 5 years) is barely above the natural growth of the working age population. As Krugman puts in in his latest column:


the administration hailed last month's job growth as something wondrous to behold, yet there were 68 months during the Clinton years when employment grew faster.

In an other thread over at the European Tribune, we have the following numbers for France and the UK, two of the most dynamic countries, demographically speaking, between 1994 and 2004:

France: job seekers: +12% jobs: +14%
UK : job seekers: +6% jobs: +11%
(US : job seekers: +20% jobs: +17%)

So Europe, whether "Statist" France or the free-market UK, can be said to have created MORE jobs than the US, relative to its population.


America grows while Europe stalls for many reasons, among them disparities in flexibility caused by employment laws. Europe will never recover until employment protection statutes are modernised and politicians restore flexibility to employers and workers.

This is just a reflex: "Europe stalls" is common wisdom. I'm pretty sure that many of you genuinely believe it. BUT IT IS NOT EVEN TRUE.

1994-2003 GDP growth per person:
USA: 2.1%
France: 2%
Germany: 1.2%
Spain: 3%

See this, associated with the tax rate of each country (already discussed in a previous diary: Hard fact: NO LINK between lower taxes and higher growth:


The unsung story behind US job creation is the flexibility and turnover in American labour markets, which boost employment. Frequent job changes lead to better job matches and higher productivity. In 2004 there were 54m new hires and 51m job separations in a labour force of 147m. Over half these separations were voluntary - people who left jobs because of better opportunities. Younger baby boomers, born in 1957-1964, held an average of 9.6 jobs from age 18 to 36. This turnover is a leading cause of job creation.

51m job separations in a year? I don't see how you get such a high number without counting all the McJobs, student internships, temps and other unsecure jobs that come and go all the time. Same thing for that average number of jobs between 18 and 36. How many of these "jobs" are actual jobs, and how many are summer jobs, gigs to pay for your studies or to get started? How honest is that number?


(...) countries with fewer employment protection laws have greater growth in employment and economic activity. Laws put into place with the best of intentions for job protection result in job destruction.

Ricardo Caballero, a professor at MIT (...) found that the links between hiring and economic growth are slower in countries with high legal protection against dismissal, especially where such protection was enforced.

This makes intuitive sense. When employers cannot fire workers easily, as is the case in the European Union, they hire fewer of them when economic growth picks up. When the cost of European mandatory benefits, such as paid maternity leave and long ­vacations, is added to the difficulty of firing, slow job growth becomes inevitable. Countries with high employment-protection legislation and less turnover have more long-term unemployment.

I like this last sentence "where such protection was enforced". How dare they!? Actually apply laws? What a quaint concept.

But I note that the study is about 60 countries, which is not a serious way to make a point about Europe and the USA as it includes many developing economies which are too different to be comparable.


Another disadvantage of inflexible labour markets is that they encourage older people to retire early. (...) Owing to flexible employment laws, a higher percentage of American older citizens work than in many other industrialised countries. In 2003, 14 per cent of Americans 65 and older remained economically active, a figure exceeded only by Japan in leading industrialised countries. In France, Italy, Germany, Canada and Australia, only 1 to 7 per cent of older citizens were economically active.

Yeah, right, this is indeed a disadvantage to not work when you are 65 or more, just like maternity leave and holidays are disadvantages. Stupid commie bastards.


In sum, a comparison of US data with countries that have enacted so-called job protection laws shows that these laws increase unemployment, deter the shift of workers from unproductive to productive jobs and discourage the elderly from working. It is ironic that America's supposedly more porous safety net provides more job security than Europe's rigid labour laws.

The article only supposedly "proved" that America provides more jobs (although I think I debunked that), but I don't see how that translates into providing "job security".

Of course, the write is a hack disguising as a scholar:

The writer, [Diana Furchtgott-Roth] a senior fellow and director of the Center for Employment Policy at the Hudson Institute, was chief economist at the US Department of Labor 2003-5


The Hudson Institute is a hard-right activist think tank that advocates the abolition of government-backed Social Security and an end to corporate income taxes. It also campaigns heavily on environmental issues (pro-GM, anti-organic).

It publishes things like this:


As if the decision to treat terror as a criminal matter did not place a large enough impediment in the path of the security forces, we have the infatuation of the British establishment with multiculturalism, and the pride with which its members and the left-wing press point out that 300 languages (soberer sources put the number at half that) are spoken in London.

But they appear serious, and there are many of them, and by repeating the same lies over and over, they become common wisdom.

Don't believe everything you read about the economies of "old" Europe. Question the assumptions and the "facts" that are used as arguments. And remember that if all of this is not true, that also means that all the arguments for conservative, anti-Union, anti-social policies in the USA lose their sole argument, that they are better for the economy and for jobs in the end. They are NOT.

Daily Kos: Debunking Busheconomics

0 Comments:

Post a Comment

Links to this post:

Create a Link

<< Home