For years the media liked to tout the fact that Europe had a higher unemployment rate than the United States. This was routinely presented as evidence that Europe's more generous welfare states and strong labor movements were outmoded in a modern economy. This story lost credibility as the unemployment rates have converged over the last few years, and in recent months U.S. unemployment exceeded Europe's levels. Now, the media are ridiculing Europe's efforts to reduce its unemployment rate. The NYT complains that companies are reducing hours rather than laying off workers, among other steps. In fact, this would be a really great way to deal with demand shortfalls. If hours were cut back every time demand fell off, then we could avoid subjecting millions of people (tens of millions in the current downturn) to forced unemployment or underemployment. In the U.S. economy, a 5 percent reduction in average work hours could save roughly 7 million jobs.
--Dean Baker
