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At Home and Abroad

At Home and Abroad: U.S. Labor Market Performance in International Perspective

Francine D. Blau
Lawrence M. Kahn
Copyright Date: 2002
Published by: Russell Sage Foundation
Pages: 328
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  • Book Info
    At Home and Abroad
    Book Description:

    Throughout the latter part of the 20th century, the U.S. labor market performed differently than the labor markets of the world's other advanced industrialized societies. In the early 1970s, the United States had higher unemployment rates than its Western European counterparts. But after two oil crises, rapid technological change, and globalization rocked the world's economies, unemployment fell in the United States, while increasing dramatically in other nations. At the same time, wage inequality widened more in the United States than in Europe. InAt Home and Abroad, Cornell University economists Francine D. Blau and Lawrence M. Kahn examine the reasons for these striking dissimilarities between the United States and its economic allies.

    Comparing countries, the authors find that governments and unions play a far greater role in the labor market in Europe than they do in the United States. It is much more difficult to lay off workers in Europe than in the United States, unemployment insurance is more generous in Europe, and many fewer Americans than Europeans are covered by collective bargaining agreements. Interventionist labor market institutions in Europe compress wages, thus contributing to the lower levels of wage inequality in the European Union than in the United States.

    Using a unique blend of microeconomic and microeconomic analyses, the authors assess how these differences affect wage and unemployment levels. In a lucid narrative, they present ample evidence that, as upheavals shook the global economy, the flexible U.S. market let wages adjust so that jobs could be maintained, while more rigid European economies maintained wages at the cost of losing jobs.

    By helping readers understand the relationship between different economic responses and outcomes,At Home and Abroadmakes an invaluable contribution to the continuing debate about the role institutions can and should play in creating jobs and maintaining living standards.

    eISBN: 978-1-61044-067-7
    Subjects: Business, Economics, Sociology

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. About the Authors
    (pp. ix-x)
  4. Acknowledgments
    (pp. xi-xii)
  5. Chapter 1 Introduction: The Labor-Market Performance of the United States in an International Context
    (pp. 1-18)

    The contrast between the labor-market performance of the United States and that of most other advanced economies over the 1980s and 1990s has been striking. In 1973, the unemployment rate standardized to a common OECD definition was 4.8 percent in the United States but 3.2 percent or below in Australia, Austria, Belgium, France, Japan, the Netherlands, Norway, Spain, Sweden, the United Kingdom, and West Germany. The unweighted average unemployment rate among these countries was 2.1 percent, an astonishingly low figure by today’s standards.¹ American economic observers pondered the explanation for the persistently higher U.S. unemployment levels. This concern was well...

  6. Chapter 2 Labor-Market Performance: How Does Labor-Market Performance in the United States Compare to That in Other Countries?
    (pp. 19-69)

    Labor-market performance in the United States diverged sharply from that in other advanced industrialized countries in the 1980s and 1990s. In this chapter, we chart this divergent experience in detail using data gathered by the OECD and the U.S. Bureau of Labor Statistics (BLS), data that are, as far as possible, comparable across countries. We first examine indicators of employment, such as the unemployment rate, employment-to-population ratios, and work hours among the employed. Next, we compare real wages, labor productivity, labor costs, wage inequality, and the gender pay gap across countries and over time.

    While there is some diversity in...

  7. Chapter 3 Labor-Market Institutions: How Do Labor-Market Institutions in the United States Compare to Those in Other Countries?
    (pp. 70-100)

    In the previous chapter, we presented dramatic evidence that labor markets have performed very differently in the United States than in other advanced countries on a number of important dimensions. Several of the patterns uncovered were seen to be consistent with the overall hypothesis that labor markets are much closer to a laissez-faire model in the United States than elsewhere. A main goal of this book is to determine the extent to which institutional differences and policy interventions are responsible for these differences in performance. In order to achieve this aim, we must see just how institutions and policies differ...

  8. Chapter 4 Detecting the Effect of Institutions on Labor-Market Performance: Conceptual Issues
    (pp. 101-132)

    In the last two chapters, we documented the considerable differences between labor-market performance and labor-market institutions in the United States and other OECD countries. The data reported there are consistent with the view that institutions are an important part of the story explaining why the United States has had greater success in lowering unemployment than have other OECD countries but has also experienced lower real-wage growth and higher and more rapidly rising wage inequality. But this juxtaposition of data on outcomes and differences in institutions is not sufficient to establish a fully convincing case for the importance of institutions. An...

  9. Chapter 5 Labor-Market Institutions and Unemployment: Macroeconomic Evidence
    (pp. 133-167)

    We begin our discussion of evidence on the effect of labor-market institutions on labor-market performance with one of the most basic and fundamental questions that one can ask: What influence do institutions have on a country’s overall unemployment rate? This question is motivated both by the importance of unemployment as a negative indicator of labor-market performance and by the striking differences in unemployment across countries that we noted in chapter 2. Economists are concerned about unemployment in part because of the great importance of labor income to individual families’ well-being. In addition, nations that have persistently high levels of unemployment...

  10. Chapter 6 Labor-Market Institutions, Relative Wages, and Employment: Microeconomic Evidence
    (pp. 168-227)

    In this chapter and the next, we take a close look at a variety of research examining the effect of institutions on relative wages and relative employment. As we noted in chapter 4, the most-convincing evidence on the importance of institutions must take into account other possible causes of wage and employment outcomes. And, while the macroeconomic evidence discussed in the last chapter is consistent with the notion that institutions affect unemployment, it cannot easily account for alternative explanations. Evaluating the effect of other causes is crucial in reaching an accurate assessment of the effect of institutions. For example, given...

  11. Chapter 7 Labor-Market Institutions and the Gender Pay Gap
    (pp. 228-254)

    Virtually every industrialized country has passed laws mandating equal treatment of women in the labor market. Yet, despite this universal concern on the part of policy makers and, implicitly, the citizenry whom they represent, while the gender wage gap is on the decline in many countries, it is a persistent feature of the labor market in virtually every nation. Moreover, the extent to which men outearn women varies substantially across countries as well.

    For example, the data reported in chapter 2 indicate that, in the 1990s, the gender pay ratio was relatively high in countries such as Australia, Belgium, France,...

  12. Chapter 8 Policy Implications and Future Research Directions
    (pp. 255-266)

    In the preceding chapters, we have examined the effect of labor-market institutions on labor-market performance. The context has been the contrast between the excellent record of the United States on employment, especially in the 1990s, on the one hand, and the stagnating real wages and sharply rising wage inequality there in comparison to the situation in other Western nations, on the other. We have posed as a possible explanation of these trends the interaction between America’s noninterventionist labor-market institutions and the macroeconomic shocks relating to productivity trends, globalization, technological change, and monetary policy that all Western nations have experienced since...

  13. Notes
    (pp. 267-284)
  14. References
    (pp. 285-304)
  15. Index
    (pp. 305-314)