On Europe and 'Structural Reform'

Spain, unemployment rate 22.9 percent, shows why structural reform really is needed in Europe. What does "structural reform" mean? Mostly, labor-market reform--which is another euphemism. Let's be plain: Spain and some other EU countries need to confront their unions. I've a new column for Bloomberg View on the subject.

To say the problem is merely the power of organized labor is too simple-minded. Germany has strong unions yet has been successful -- too successful from Europe's point of view -- in controlling wage costs and maintaining high employment. The problem is not powerful unions in their own right, but powerful unions combined with maladapted wage-setting arrangements that, once established, unions are determined to defend.

That's why it's not only simple-minded but also plain wrong to deny that Europe's unions are part of the problem. Unions arguably act in the longer-term interests of their members. What Spain shows is that, depending on the rules, these gains may come not mainly from the owners of capital but from fellow workers, or ex-workers to be more precise.

In other words, there's a social justice component to structural reform -- but not the soak-the-rich, save-the-worker one emphasized by the European left. It would be good to understand that before taking sides.

The column mentions an article by Samuel Bentolila et al. There's a short version on Vox, The Spanish labour market: A very costly insider-outsider divide, and a fuller study, CEPR Discussion Paper 8691, posted on the CEPR website (gated). If you don't read the column--how dare you even think that?--do read the Vox article.

Presented by

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Global

Just In