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Observations and Conjectures on the U.S. Employment Miracle

  • Alan Krueger
  • Jorn-Steffen Pischke

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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File URL: http://arks.princeton.edu/ark:/88435/dsp01d217qp51c
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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 769.

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Date of creation: Aug 1997
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Handle: RePEc:pri:indrel:dsp01d217qp51c
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