1. Labor market policies 1 of 20 4 Labor market policies: historical and comparative perspectives Philippe Askenazy (Paris School of Economics) www.jourdan.ens.fr/~askenazy/laborpolicy.htm Updated slides!

2. Labor market policies 2 of 20 Outline of the courses 03/15, 9.15-12.15: 2000’s. Old tools or new tools? Minimum wages versus in- depth liberalization A comparative perspective: current policies 03/22, 9.15-12.15: Comparative methodology 03/29, 9.15-12.15: Scandinavian countries, Germany, UK, US. 3 presentations (Sweden, Germany, US)

3. Labor market policies 3 of 20 Outline of the courses 04/05, 9.15-12.15: Labor policies in developing countries. 2 presentations (India, South-American) 04/26, 9.15-12.15: The coordination of European labor policies; the labor policies in the current crises. 2 presentations (OECD and EU strategies)

4. Labor market policies 4 of 20 “Euro zone”: 1987-1990 a new Phillips curve?

5. Labor market policies 5 of 20 1988-1990  NO e.g. the proportion in Europe of long term unemployed remained high  Decline of short and long-term unemployment in Europe  End of stagflation: low persistent inflation rate  End of hysteresis?

6. Labor market policies 6 of 20 1991 the end of a short-cycle  Short recession in the US but  Deeper recession in Europe  Rise of unemployment, especially in Scandinavian countries (why ?) German reunification: a positive demand shock and a negative monetary shock End of the Cold War but the first Gulf war  new tensions on oil/gaz market

7. Labor market policies 7 of 20 Harmonized unemployment rate 1988-1994

8. Labor market policies 8 of 20 But US “new economy”: an idea from entrepreneurs (not economists) Clinton 1993: - massive public support to ICT infrastructures - from military R&D to mixed R&D + Generalization of innovative work practices

9. Labor market policies 9 of 20 US “new economy”: a productivity resurgence

10. Labor market policies 10 of 20 US growth decomposition (Jorgenson-Stiroh) Productivity growth + digitalized economy = rapid growth without inflationist tensions + unemployment drop

11. Labor market policies 11 of 20 US “new economy”

12. Labor market policies 12 of 20 US were not an exception Ex: Finland, also, followed the “entrepreneurs” - Who followed the economists? France!

13. Labor market policies 13 of 20 Ideas from economists in 1991 The “revenge” of the histeresis but no view of the “new economy”! Necessity to build a new labor policy from the consensus of economists ~ Washington consensus for developing countries In France: the Commissariat Général au Plan (Charpin/Brunhes) International: The OECD Job Study  transatlantic consensus: same structural changes i.e. globalization and biased technological progress. Why ?  But different institutions  higher wage inequality in the US versus low-skilled unemployment in Europe

14. Labor market policies 14 of 20 Economic ideas born in 1991-1994 Assumption: unemployment is a sharper inequality that wage inequality  Reduce labor market rigidities: simplified firing for increasing the propensity to hire; simplified hiring  Activate passive labor policies: lower unemployment benefits associated with “accompaniment” + sanctions  Reduce the social-fiscal corner and/or minimum wages  Evaluate labor market policy tools with new econometric methods: matching, propensity score… (Heckman)

15. Labor market policies 15 of 20 Ex: French new labor policy 1991-1997 1991-1993: “enrich the labor content of growth” through niche job markets  Income tax cuts for households that employ personal workers  Immediately increased by 100.000 the number of personal workers: formerly undeclared jobs?  Social tax cuts for part-time jobs  ?

16. Labor market policies 16 of 20 Ex: French new labor policy 1991-1997

17. Labor market policies 17 of 20 Ex: French new labor policy 1991-1997 1993-1997: “enrich the labor content” of growth through social tax cuts for low-wage workers 

18. Labor market policies 18 of 20 Ex: French new labor policy 1991-1997 Controversial evaluations: why?  Juppé social tax cuts: 100,000 to 600,000 job creations.  “consensus” of administrations: about 300,000 jobs  The share of low-skilled jobs re-increased!  But costly: about 7-8 billions current euros… And also Financial support for apprenticeship  rapid development… for tertiary education: substitution? Robien 1996: massive social tax cuts for shorter working time => favor the socialist idea of the 35-hour workweek Aborted “SMIC jeune”

19. Labor market policies 19 of 20 France: 1997-2000 The surprising dissolution of the Parliament and the return of a socialist government (green-communist- socialist) => Enrich the job content of growth through sharing labor and public jobs Analysis: 1. slow growth recovery… (while US, Nordic countries massively invested in the knowledge economy) 2.bargained reduction of working time in most continental European countries except in France Youth employment: stock of about 200,000 workers on 5-year contracts paid at the minimum wage, mainly as assistants in schools

20. Labor market policies 20 of 20 The Aubry laws  Impacts?

21. Labor market policies 21 of 20 Exceptional job creations for France 300,000 Juppé + 300,000 Aubry  1998,1999 and 2000 = the first, second, and fourth best years for job creations during the century in France  But still high unemployment in 2000 8.6% 16.6% for the 15-24 10% for women about 40% of long-term unemployed … in France but also in Europe!

22. Labor market policies 22 of 20 2000 Euro zone”: still high unemployment