Labour Market: The European model is superior to the American – Natixis

The traditional functioning of the labour market in a recession is that in the US, companies lay off workers suddenly and rapidly while in the euro zone, the adjustment in employment is far slower, per Natixis.

Key quotes

“The European model of employment adjustment in a recession (slow, cushioned as much as possible) is superior to the US model (drastic adjustment of employment) because it prevents a worsening of the crisis through a decline in household demand and a loss of human capital.”

“The flaw of the European model is that the slow and cushioned adjustment in employment leads to a decline in companies’ profitability and capacity to invest. However, a new European model is emerging with the coronavirus crisis.”

“Efforts are being made to limit the fall in corporate earnings as much as possible: government coverage of the wages of employees on short-time working schemes, deferral of taxes and certain charges, which limits the disadvantage of the European model compared with the US model.”