Economic Integration

c) Employers cannot easily fire of lay off workers

• c) Employers cannot easily fire of lay off workers
• elaborate procedures and approval of works councils required for significant layoffs
• German law, 30 days before any termination, firms must inform the state employment office and the works council.
• d) EU Works Council directive (enacted in 1994) requires employers to consult and inform employees about decisions that could directly or indirectly affect their jobs and to keep them informed about the financial health of businesses
• “social dumping“ (social policy advocates call the move to lower cost): transfer of production to lower cost jurisdiction
• Renault case, Renault was sued by the Renault European Work Council for failure to fulfill its info and consultations before closing the plant in Belgium and moving it to lower labor cost in Portugal.
• e) Hours worked per employed person much lower than in the US
• in 2003-US-1,792 hours per year; Italy 1,600; France-1,430; Germany-1,446; Korea-2,390

f) Results of regulation:

• f) Results of regulation:
• High Costs of Regulation
• The costs of labor mkt is not simply cost of compliance but the paid vocations, maternity leaves, and unemployment benefits
• the costs of maintaining the highly regulated EU labor mkt as measured by income tax and social security contributions; Tax burden added to labor costs.
• High priced and inflexible labor
• Costs of labor inflexibility are not included in the monetary cost of labor; employers unable to lay off workers in bad times.
• strong disincentives to growth and job creation
• High unemployment -8-11%, in US-5-7%
• 2009 august EU-3-18%, US-9.7%
• Virtually no increase in private sector jobs over past 20 years
• High long-term unemployment
• More than 40% of the unemployed have been out of work for more than a year (US-11%)
• High youth unemployment
• In Spain half of age less 24 out of work
• High unemployment among unskilled
• wages too high relative to skilled
• Unemployment geographically concentrated
• low mobility of labor; concentrated in particular regions or towns so it is hard to escape. In the US people move to get jobs, but Europeans without jobs cannot move or see no point in doing so.