Why the U.S. economy is outperforming many of its peers


Source: OECD Employment Outlook.

Here are three statements, all of them true: America’s job market is doing better than most of its peers’ after the Great Recession; America’s job market isn’t doing so hot; America is creating a lot of low-quality jobs, but its job quality could be worse.

These realities are laid out in a report out today from the Organization for Economic Cooperation and Development, which evaluates countries on a variety of measures related to their labor markets. They raises a lot of questions about why the U.S. market is doing so well/poorly (depending on your frame of reference) and whether countries can create a lot of jobs and also a lot of good jobs at the same time.

I posed a few of those questions to Mark Pearson, the OECD’s deputy director for employment, labour and social affairs, in an email interview. Among his candid responses: “Is America’s job market performance so great?”; “macroeconomic policy has been overall quite sensible” in the United States; and “motivated workers are more productive than those who think work is drudgery “.

His answers are lightly edited for length.

Jim Tankersley: Who or what gets credit for America’s superior job-market performance since the financial crisis? More aggressive monetary policy? Better fiscal policy? Some advantage in economic fundamentals?

Mark Pearson: Is America’s job market performance so great?Sure, the unemployment rate has fallen sharply and at 6.2%, is back where it was in September 2009 when Lehman Brothers went under. It is well below the OECD average of 7.4%. Over 50 months of increasing employment is by any reckoning an impressive achievement.

But on the other hand, trends in the labor force participation rate should be setting alarm bells ringing. Fewer people are now either working or looking for work than 15 years ago in the United States.The only other developed countries where this is true are the Nordic countries – where the decline has been less, and from a much higher rate. About half of this decline in the US is due to population aging – older people are less likely to work – but other countries are aging too, often more rapidly than the US.

Prime age people are less likely to be in the labor force than before. In part this is because of rising disability, but perhaps also work simply doesn’t pay enough to persuade low-skill workers that it is worth the effort.

Jim Tankersley: In the past few years the United States government has raised taxes, cut federal spending and generally not followed an agreed-upon economic ‘strategy’ for years now. So – have those actions helped its labor market? Or have they just been less bad than the rest of the OECD’s?

Mark Pearson: The relatively stronger labor market recovery in the United States, as compared to that in many Euro-zone countries, largely reflects a stronger and steadier recovery in GDP growth.

That may seem a surprise, considering how much disagreement there has been in the United States about overall macroeconomic policy in recent years. Despite all of the debate and unfortunate episodes, such as the temporary shutdown of the Federal government in the Fall of 2013, macroeconomic policy has been overall quite sensible. The Federal Reserve moved strongly towards an expansionary stance on monetary policy in the Fall of 2008 and is still maintaining a very expansionary stance, even as it signals it will gradually ease off as conditions allow. The fiscal stimulus package enacted in early 2009 provide a very useful boost to the economy for several years.

Subsequently, fiscal policy has been somewhat contractionary, but much less so than in the European countries that had to enact dramatic spending cuts and sharp tax increases after financial markets became concerned about their solvency.

Another important advantage of the US economy vis-à-vis much of Europe is that it has its own currency. Because countries such as Spain and Germany, with very different economic circumstances, share the same currency, the only way to get economies into balance has been through very painful changes in wages and prices.

Jim Tankersley: Many Americans have worried that the nation has created a decent number of jobs post-recession, but not a lot of high-quality ones. Does your research bear that out? Why doesn’t there appear to be a trade-off between creating a lot of jobs and creating good jobs?

Mark Pearson: We have developed a new way of assessing the quality of jobs in different countries, taking account of the level of earnings; job security; and the quality of the working environment (basically: will doing your job make you ill?).

The US actually does well compared to other countries, on average, on the quality of the work environment. American managers are more likely to give workers the resources they need to do their work – autonomy, a chance to learn, good workplace relationships – so that they can cope with the stresses of work.

Earnings are high on average in the United States, but very unequal. This means the US is rated around the average for OECD countries. On job security, the US scores badly compared to other countries. Loss of work means a heavier cut in living standards than in most European countries.

The United States is not alone in creating more poor quality jobs, rather than good quality jobs; this is a problem common to many countries. Yet some countries have bucked the trend – the Netherlands, Sweden, Denmark and Norway, for example. One increasingly common finding is that minimum wages can boost the incomes of low-paid workers without affecting job creation.

There are limits, of course – a sensible minimum wage policy will take into account the lower productivity of young people and regional differences, and will be guided by non-partisan advise from labor market experts – but when done well, minimum wages can raise job quality. More generally, improving job quality in the three dimensions we consider is a way of motivating workers, and motivated workers are more productive than those who think work is drudgery or dangerous.

Jim Tankersley is the editor of Storyline, where he explains complex public policies and illuminates their human impact. He's from Oregon, and he misses it.
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