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Some social consequences of the financial crisis in Europe and comparisons with the US. Etienne Wasmer, Sciences-Po, OFCE, CEPR and IZA. Monday, April 20 at 4pm - Buffett Center Conference Rm , Northwestern University. Initial title/subject. Is America becoming France?
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Some social consequences of the financial crisis in Europe and comparisons with the US Etienne Wasmer, Sciences-Po, OFCE, CEPR and IZA Monday, April 20 at 4pm - Buffett Center Conference Rm, Northwestern University.
Initial title/subject • Is America becoming France? • For an economist, social perceptions difficult to apprehend. • If no data, no reality? • At least, more difficult to « falsify » arguments and theories. • How to deal with that?
Outline of the talk • Start with description of the French labor market, political implications. • Trust in institutions to deal with it. • Structural problems: the adaptability of labor markets and lobbying.
Dual labor market view? • Male 25-49 traditionnally protected, employment rate higher than in the US. • Outsiders: lower skill women, youth, minority. • Now, the « core » is affected by the recession.
New type of recession, affecting the core of protected employed workers. • Political tensions to foresee! • Males below 25 are the ones to watch!
America becomes France: labor markets converge! • What about 2: trust issues? • Work by Yann Algan (Sciences-Po) and Pierre Cahuc (Ecole Polytechnique) • La société de défiance
« Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people» WVS 1990, 2000
« No confidence in Parliament… » NB: Harris Poll 2009 9% have « a great deal of confidence » in the Congress
Convergence again? • What about confidence in the ability to manage the current situation?
That was in April 2008 In March 2009: Harris poll: 36% have a great deal of confidence in the White House. • In this year’s survey the leaders of six institutions enjoy the most confidence: The military (58% have a great deal of confidence); Small business (48%); Major educational institutions (40%); The White House (36%); Medicine (34%); Organized religion (30%); • Leaders of the following institution engender the lowest levels of confidence: Wall Street (only 4% have a great deal of confidence); The Congress (9%); Law firms (11%); Major Companies (11%); The press (12%);
In terms of trust • France-US divide in terms of trust in major institutions.
Last point • Adaptability of the labor market. • Based on Wasmer and von Weizsäcker • « A Better Globalization Fund », Bruegel Policy Brief, Jan. 2007 • European new fund to cope with Globalization, adapted from US Trade Adjustment Assistance created by Kennedy Administration in 1960’s.
Idea behind Glob. Fund • Some workers hurt by trade policy of EU • Left hand would repair what right hand did • Limited funding and activation schemes (mobility, training) • Different from original TAA (passive policies, income support)
The Costs of Job Displacement in the EU and the US Source: Kletzer (2001), OECD (2005) and authors’ calculations. (*) The re-employment rates are not directly comparable: the US data is based on retrospective questions, while EU data is based on a panel and thus follows more accurately a cohort of displaced workers.
Theory • Employment protection and « labor market frictions » raise the incentives to invest in specific skills. • In turn: higher demand for employment protection, in order to protect specific skills. • Good characterization of EU-US differences • Hall, P.A.; Soskice, D. (2001): An Introduction to Varieties of Capitalism. In: Hall, P.A.; Soskice, D. (eds.): • Wasmer, E. American Economic Review, June 2006.
Conclusion • Is America becoming France? • Not yet there! • But surely, political tensions. • Might resorb in 2010. • But implies a likely slow down of structural reforms (if possible!)
