Failing the Test? The Flexible U.S. Job Market in the Great Recession

Abstract

The Great Recession tested the ability of the "great U.S. jobs machine" to limit the severity of unemployment in a major economic downturn and to restore full employment quickly afterward. In the crisis the American labor market failed to live up to expectations. The level and duration of unemployment increased substantially in the downturn and the growth of jobs was slow and anemic in the recovery. This article documents these failures and their consequences for workers. The U.S. performance in the Great Recession contravenes conventional views of the virtues of market-driven flexibility compared to institution-driven labor adjustments and the notion that weak labor institutions and greater market flexibility offer the best road to economic success in a modern capitalist economy.

Weathering the Great Recession: Variation in Employment Responses by Establishments and Countries

“…The Netherlands paid 70 percent of the wages for the non-work hours of employees that firms 6 kept "on the job." And so on (Freeman 2013). Absent agreements and policies, European firms would likely have terminated more workers in the recession and hired more in the recovery, attenuating if not reversing the pro-cyclic movement of labor productivity.…”

Characteristics and Drivers of the Swiss “Job Miracle”

“…3 As a result, the growth rate of labor productivity in Switzerland between 2000 and 2010 was, in a historical perspective, unprecedentedly low (SIEGENTHALER, 2014). 4 See e. g. FREEMAN (2013). that observers of economic activity did not foresee the "job miracle".…”

Unemployment: The Great Recession and Beyond

“…Southern European countries and Ireland are among the countries who have seen long-term unemployment increase the most, but also Denmark, the United Kingdom and the United States have experienced a rise in long-term unemployment of about 11 percentage points. Denmark and the United States are usually characterised by low rates of long-term unemployment because of their institutional setting which encourage re-employment (e.g., Andersen and Svarer 2012;Freeman 2013). Of course the initial level of long-term unemployment is important for understanding the developments in the first panel of Fig.…”