Climbing out of a Deep Hole: Which Path up?

In this paper, the authors first discuss the Neumark and Troske piece, and then compare the U.S. context to that in Europe and Korea, as described by the Caspar, Hartwig, and Moench and the Cho and Shin contributions. Although they are in basic agreement with Neumark and Troske on the extent and depth of the current employment situation, they differ to some extent in terms of remedies. While Neumark and Troske argue that the stimulus packages had a very small impact on the economy, the authors feel that this may be too negative an assessment, especially given the larger global financial forces that seem to overwhelm domestic job creation efforts. The European and Korean papers contribute an important comparative perspective on the recession. As Cho and Shin argue, Korea fared very well due to rising demand for domestic consumption and a very small welfare state. However, Korean institutions are hard to convert or directly compare to those in the United States. It is hard to tell a "European story" because of the large difference in institutions and the differing impacts of the recession. Germany and Scandinavia have clearly done much better than Spain, Greece, or Ireland. Caspar, Hartwig, and Moench emphasize that if the gains are to be longer term, there needs to be "structural reform" of the labor market--to "strengthen labor market policies that reduce structural unemployment rates, increase labor market participation, strengthen the reallocation of labor toward a smart, sustainable, and inclusive economy, and promote social cohesion by targeting specific groups of workers." All of this sounds great, but how does the United States move toward these goals? It is harder than one might expect to extract some clear lessons about how deeper economic pain could have been avoided or how one might be able to make more significant or rapid progress in pulling the U.S. labor market out of its malaise. If anything, the authors find that, of the nations examined in this set of articles, each has a different story to tell about the great recession, and the reality is that in every case, the stories are not yet fully told. (Contains 1 table.)