Itâ??s a rare person who enjoys the asset bubbles and boom-and-bust cycles that afflict the U.S. economy, most recently the
subprime mortgage crisis and implosions on Wall Street.
But Purdue University economist David Hummels contends that the United States deals with the swings better than many other countries.
Boil down the differences between Americans and Europeans, Hummels says, and Americans are willing to let a relative few unemployed people bear the brunt of downturns while Europeans prefer thicker safety nets.
Laid-off Europeans have an easier time when their luck is down, but they arenâ??t forced to get back to work as quickly as Americans, Hummel notes. While the U.S. offers a certain amount of unemployment compensation, it doesnâ??t last long, which pushes people to become productive again even if they donâ??t necessarily like the job theyâ??re forced to take.
Hummel understands something about pain caused by gyrating economies. His father was laid off several times while Hummel was growing up in Colorado, putting a great deal of strain on the family.
Still, if forced to choose, he prefers turmoil over safety.
â??I reluctantly say, I like the American model better, but Iâ??m in a position where I donâ??t get laid off,â?? says Hummel, who is tenured. â??Unless Purdue shuts down, Iâ??m in great shape.â??
If you had to choose European-style stability or American boom-and-bust, which would you prefer?
But Purdue University economist David Hummels contends that the United States deals with the swings better than many other countries.
Boil down the differences between Americans and Europeans, Hummels says, and Americans are willing to let a relative few unemployed people bear the brunt of downturns while Europeans prefer thicker safety nets.
Laid-off Europeans have an easier time when their luck is down, but they arenâ??t forced to get back to work as quickly as Americans, Hummel notes. While the U.S. offers a certain amount of unemployment compensation, it doesnâ??t last long, which pushes people to become productive again even if they donâ??t necessarily like the job theyâ??re forced to take.
Hummel understands something about pain caused by gyrating economies. His father was laid off several times while Hummel was growing up in Colorado, putting a great deal of strain on the family.
Still, if forced to choose, he prefers turmoil over safety.
â??I reluctantly say, I like the American model better, but Iâ??m in a position where I donâ??t get laid off,â?? says Hummel, who is tenured. â??Unless Purdue shuts down, Iâ??m in great shape.â??
If you had to choose European-style stability or American boom-and-bust, which would you prefer?
Back to Top
IBJ Conversations
5 Comments
Add Comment
For years our political, educational and business leaders have told us that the US economy would become the knowledge economy. The US would power the world through knowledge. That's not happening. When we start offshoring basic research I think we've got a problem. The reason we are offshoring research is that it's cheaper to hire engineers in China and India than it is in the US.
I would point out Mike, that when companies start to thin ranks, they don't necessarily cull the incompetent or less able, it's the employee who is between assignments or was reassigned to a new job and has less experience in the new job or for any number of reasons that don't have anything to do with talent, knowledge or experience.
Finally I don't really think there is an American model. What little safety net workers have, business has been trying to dismantle or limit fairly successfully for years. If there is an American model, it probably revolves around the business/CEO/political safety net ($700 billion for Wall Street, $25 Billion for Detroit). How about the corporate executive safety net, homes in Texas and Florida worth millions of dollars which they get to keep when they are sued for malfeasance and declare bankruptcy or perhaps the Halliburton Safety Net where you get cost plus contracts - the more you run up the contract costs the more profit you get.