In many respects, U.S. unemployment dynamics are unique even among other countries belonging to the Organization for Economic Co-operation and Development (OECD). Key factors that make the situation in the United States so different from most other developed economies originate from the approach to regulation. Labor protection laws in the European Union and Japan change the way unemployment occurs and develops. (Freeman, 2008)
The differences are not only present on the level of macroeconomic dynamics – they have a tangible effect on communities and individuals. As a result of weaker labor protection and access to unemployment benefits, Americans experience greater movement between employment and unemployment. In practice, it means that when left without a job, U.S. workers take less time to find a new one. For example, one study has shown that approximately 33 percent of unemployed Americans found a job in the next month. This figure is in great contrast with the German one where only 5 percent of unemployed left that condition in the succeeding month. (Freeman, 2008)
While it is not the single factor, shorter unemployment spells in the United States are clearly related to the weaker labor protection. It is simply more challenging for Americans to afford being unemployed than for their European counterparts. The U.S. system of benefits reimburses a relatively small percentage of the earnings and the insurance lasts shorter than in Europe. The research on comparing unemployment duration in Germany and the United States from the 1980s till the 200s reveals that the amelioration of social protection in the U.S. has begun to close the gap between the two dynamics. (Gangl, 2012)
Thus, a more conservative labor protection policy helps reduce the duration of unemployment periods, and the social orientation of labor protection can make them last longer. It is, however, dangerous to jump into premature conclusions exclusively based on this correlation. Shorter unemployment spell comes at the cost of other things. Besides the obviously weaker social protection and level of income, that is the quality of living, when left without a job, there are less apparent shortcomings.
The American rates look well only if one limits itself to observing unemployment measurements (between 5% and 6%): the job loss numbers are much higher (up to 12%). As explained above, it is the short duration of unemployment that makes the full picture appear to be good on paper. Unfortunately, interdisciplinary research shows that the U.S. labor pattern has a worrisome effect on the public heath situation in the Untied States. (Strully, 2009)
Socioeconomic shocks provoke the deterioration of workers’ health. The studies demonstrate that it is the job loss, not the unemployment as such, that is associated with the increased offs of poor health. Even with due account to the fact that people with a fair health condition are more likely to lose their job, the health costs to the job loss are very significant. The specific research on the cases of establishment closures reveals that even after getting a new job, the adverse impact on health remains. It is, therefore, less dependent on the duration of unemployment but on the initial job loss. The association was found, in particular, with the following health conditions: hypertension, heart diseases, and mental disorders. The data suggests that a more extensive labor protection from restructuring and closures would have positive effects on reducing the health costs. (Strully, 2009)
All things considered, the American approach based on discouraging longer employment duration and reliance on the social security system can have an adverse effect on individual health conditions in workers. This comes with public health care costs, which makes the approach quite impractical. Thus, I am a supporter of a more advanced system of labor protection in the United States.
- Freeman, R. (2008). America Works. New York: Russell Sage Foundation.
- Gangl, M. (2012). Unemployment dynamics in the United States and West Germany. Heidelberg: Physica-Verlag.
- Kate W. Strully,. (2009). Job Loss and Health in the U.S. Labor Market. Demography, 46(2), 221-246. http://dx.doi.org/10.1353/dem.0.0050