The Policies and Politics of Employment Growth in 35 Democratic Nations, 1996-2006.

This paper analyzes the change of the employment rates in 35 democratic OECD and EU-countries, 1996-2006. Why were some countries more successful in increasing employment than other nations? This is the guiding question of this paper. I argue that there are various pathways to more or less employment growth. Countries that have reached a high level of employment already in the past face a ceiling problem, which makes further growth very difficult albeit not impossible. They may continue or pursue a variety of mixes of labor market policies without seriously endangering their previous level of employment. In contrast all countries that started from a low level of employment recorded strong increases if they had a low tax wedge. However, low pay roll taxes are not the only way to strong employment growth in countries with low employment level. The disadvantages of high pay roll taxes can be compensated by other employment-friendly policies. Consequently the politics of successful labor market varies. In countries with high employment level, the previous politics that were compatible with reaching a high level of employment are compatible with consolidating this level. In countries with low employment level, strong pro-market political parties, weak trade unions and collective bargaining is favorable to liberal employment-enhancing policy regimes. There are other pathways from low to high employment levels, but they are less frequently chosen. In general terms, I make two arguments: (1) Variations of employment performance may be explained better by looking at policy mixes and policy interactions rather than single policies. A policy that is employment-inhibiting in one context may be a structural precondition for employment-enhancing policies in other contexts. (2) The feasible options of policy makers depend on the level of employment and this is closely correlated with stage of the development towards a post-industrial labor market. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]