Prior to the collapse of the US job market last April, Europe’s unemployment rate was higher than America’s. Europe’s COVID-19 health crisis began earlier than America’s, but it caused both regions to experience devastating declines in economic productivity. Yet, in this economic slowdown, Europe has managed to prevent unemployment from getting out of control.
The data for April 2020 show US unemployment at 14.7 percent verses EU unemployment at 6.6 percent. The disparity points to the way the two governments approached the challenge.
In Europe, policy makers used short term work programs to hold down unemployment. These programs encouraged employers to maintain their workforce with the government subsidizing a portion of employee pay. In contrast, America’s policy response has focused on payments to mostly large businesses and a one time payment to all citizens. With less of an emphasis on subsidizing employee pay, companies quickly pushed the downsize button.
To this point, the European approach has done better at preventing a job market collapse and, though it remains to be seen, probably did a better job of supporting their economies through the crisis.