The Organisation for Economic Co-operation and Development compiles an index from 21 items covering three different aspects of employment protection: individual dismissal of workers with regular contracts, additional costs for collective dismissals, regulation of temporary contracts.
Not surprisingly, the United States has the lowest ranking on the list, fall below the OECD average. That explains the sharp rise in U.S. unemployment during the Second Great Depression. Notice, also, that while Greece and Spain are above the OECD average—and are being forced to create “more flexible” labor markets—Germany, too, has above-average employment protection.
Very interesting find. What do you make of the tight correlation between lower employment strictness and higher median per capita incomes?
Actually, Nick, I don’t see any such correlation. Countries with higher per capita incomes are located at both ends of the scale.
hmm – you’re right (if you actually run the numbers the correlation with per capita PPP income is actually slightly positive on account of Norway and Luxembourg). I saw US, Canada and the UK on one side and Greece, Spain and Mexico on the other and assumed that was representative. I guess labor market flexibility may not be such a strong pre-requisite for economic success after all.