The Labor Market Dynamics of Economic Restructuring: The United States and Germany in Transition

The Labor Market Dynamics of Economic Restructuring: The United States and Germany in Transition

The Labor Market Dynamics of Economic Restructuring: The United States and Germany in Transition

The Labor Market Dynamics of Economic Restructuring: The United States and Germany in Transition

Synopsis

This study develops a framework for the analysis of labor market dynamics based upon a new dynamic flow analysis instead of the conventional labor stock data. To identify the dynamic elements in the labor market, information on flows is needed. Flow data that have become available in recent years--in this case on the United States and Germany--show that an enormous amount of labor market mobility is occurring every month. Schettkat analyzes two of the world's most dynamic economies and labor markets--showing that the unemployed are far from being a fixed bloc but are rather a changing population responding greatly to structural alterations.

Excerpt

"There is a fact, a big unmistakable unsubtle fact: essentially everywhere in the modern industrial capitalist world, unemployment rates are much higher than they used to be two or three decades ago. Why is that?" (Solow 1986, S23). This question is at the center of this study, which is an investigation of theories and facts that might explain the rising unemployment rates in the United States and Germany. There have been, and still are, differences in the performance of the U.S. and the West German economies. The most obvious difference is the persistently high level of unemployment in West Germany and Europe in general since the mid-1970s accompanied by very modest employment growth. In contrast, the U.S. economy has added a tremendous number of jobs and has. experienced decreasing unemployment rates in the 1980s. Other important differences are sectoral developments and the integration of the two economies in the world market.

Numerous explanations for these differences in economic trends have been put forward. The most prominent focus on the assumed differences in the flexibility of the labor market and, hence, on the ability to adjust to changing conditions--an ability demonstrated by the economies that have become better integrated in the world economy. The United States is often regarded as the major example of the job-creating potential of flexibility, whereas Germany is used as an example of an overly regulated labor market that has prevented employment from growing.

Economic theories still do not provide adequate explanations for the increase . . .

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