How Did the US Eclipse Europe in Productivity? Mass Layoffs
Widespread job dismissals during the pandemic followed by a rapid recovery delivered big gains in output per hour worked.
It looks as if the sloppy American way of dealing with a historic labor market shock had its merits.
Photographer: Frederic J. Brown/AFP/Getty Images
After the start of the Covid-19 pandemic brought fear and lockdowns in early 2020, many European countries acted quickly to preserve jobs. In Germany, the long-established system of Kurzarbeit — which literally translates as “short work” — allowed employers in hard-hit sectors to keep workers on the payroll, with the government footing much of the cost, even as work dried up.
That’s not what happened in the US, where payroll employment fell by 19.3 million jobs from February to May that year, and the unemployment rate approached 15%. In Germany, unemployment topped out at 3.9%. In the full euro area, where unemployment was much higher than in the US before the pandemic, it peaked at 8.6%.