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Unemployment: US vs. European Models

In an Aug. 28 column about “shared sacrifice,” Booth's Peter Luke stated that unemployment rates in Europe are lower than those in the United States.

Luke wrote: “European unemployment rates are lower than in the U.S. because instead of laying off massive numbers of workers — thus requiring more hours from those who remain — every worker simply works fewer hours. And takes home less pay.”

What Luke didn’t mention is that unemployment in this country didn’t come close to Europe’s until very recently.

From 1992 to 2008, the average annual unemployment rate here was far below Europe’s, according to statistics compiled by the Organisation for Economic Co-operation and Development, an international organization consisting of 34 countries.

Our rate ranged from 5.5 percent to 7.1 percent from 1992 to 2008, while Europe’s hovered between 7.1 percent and10.2 percent. For example, when Bill Clinton took office in 1993, America's unemployment rate was 6.9 percent, while Europe’s was at 10.2 percent. When George W. Bush took office in 2001, our unemployment rate was 4.7 percent, while Europe’s was 8.2 percent.

The unemployment rate here didn’t surpass Europe’s until 2009, when it reached 9.3 percent and Europe’s was 9.2 percent. In 2010, both Europe and America averaged 9.6 percent unemployment.

“The matching unemployment rates look like a recent event and (are) probably a function of America adopting Europe-like policies, such as centralization of decision-making and hyper-regulation of business,” said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy.“You could say it was the Bush-Obama administrations, and you might even say it was more Bush.

“We have long enjoyed lower unemployment rates than Europe because of our free-market economy,” LaFaive added. “The last two administrations have centralized authority in Washington to a much greater degree. If we adopt European-state policies, we may very well end up with a European economy.”


See also:

Detroit: The Triumph of Progressive Public Policy

Gov. Granholm Offers Nation Advice on Job Creation

Michigan Unemployment Payments May Fuel More Unemployment

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