Observations and Conjectures on the U.S. Employment Miracle


Observations and Conjectures on the U.S. Employment Miracle
This paper has three goals. First, to place U.S. job growth in international perspective
by exploring cross-country differences in employment and population growth. This section finds
that the U.S has managed to absorb added workers -- especially female workers -- into
employment at a greater rate than most countries. The leading explanation for this phenomenon
is that the U.S. labor market has flexible wages and employment practices, whereas European
labor markets are rigid. The second goal of the paper is to evaluate the labor market rigidities
hypothesis. Although greater wage flexibility probably contributes to the U.S.'s comparative
success in creating jobs for its population, the slow growth in employment in many European
countries appears too uniform across skill groups to result from relative wage inflexibility alone.
Furthermore, a great deal of labor market adjustment seems to take place at a constant real wage
in the U.S. This leads to the third goal: To speculate on other explanations why the U.S. has
managed to successfully absorb so many new entrants to the labor market. We conjecture that
product market constraints contribute to the slow growth of employment in many countries.

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