Is the OECD Jobs Strategy behind
U.S. and British Employment and
Unemployment Success in the 1990s?
The most important theme of the Organization for Economic Cooperation and Development's (OECD) Jobs Study (1994a, 1994b), and of the substantial body of work that it subsequently inspired, was the need for labor market “flexibility.”1 In the Jobs Study, the OECD urged member countries to reform unemployment benefit systems so as to ensure that they did not “impinge” on the functioning of labor markets; to modify employment security provisions that “inhibit“ed”” employment expansion; to eliminate “impediments to, and restrictions on, the creation and expansion of enterprises”; to increase “flexibility” of working-time regulations; and, most important, to take action toward making “wage and labour costs more flexible by removing restrictions that prevent wages from reflecting local conditions and individual skill levels, in particular of younger workers” (OECD 1994a: 43). Like the OECD, the International Monetary Fund (IMF) has strongly promoted labor market deregulation as the cure for high unemployment (IMF 1999, 2003).
As part of the effort to sell the flexibility prescription, the OECD-IMF orthodoxy has implicitly, and sometimes explicitly, held up the United States and, to a lesser degree, its closest European counterpart, the United Kingdom, as models of labor market flexibility. Indeed, through most of the second half of the 1990s, both countries enjoyed low unemployment and high employment rates relative to most of the rest of the OECD, accompanied, it should be stressed, by the highest levels of income inequality and poverty seen in fifty years. In the standard account, U.S. and British flexibility made this employment performance possible. Key aspects of