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The Art of Full Employment: Unemployment Policy in Open Economies.

Edited by Chris de Neubourg. Amsterdam: North Holland, 1991. xii, 532 pp. ISBN 044-89216-8. $78.50.

Originating in a recent conference held at the University of Limburg, this book consists of 23 economic studies, each seeking in some way to explain the differences in unemployment among OECD member countries. As befits a conference volume, the book is somewhat eclectic, reflecting the varied backgrounds of its authors. The contributions, sometimes complete with a discussant's comments, range from the descriptive to the prescriptive, from overviews to literature reviews, from neo-classical to neo-Keynesian, and from macro to micro economic analyses. Generally written on a nontechnical level, most of the papers manage to be informative and engaging. But as no consensus on how to tackle unacceptable levels of unemployment--or indeed on what constitutes "unacceptable"--emerges from these pages, readers and policy makers are left to fend for themselves as to the appropriate course to pursue.

The volume essentially consists of two parts. The first 11 chapters concentrate on unemployment in the Dutch and Belgian economies, both of which had poor labor market records in the 1980s compared with the records of other small, open European economies. For the uninitiated reader these studies, utilizing established methods of economic investigation, will help illuminate the workings of the labor market in the Low Countries. In particular, the overview by H. A. Keuzenkamp and F. van der Ploeg ably highlights the problems of the Netherlands, which is committed to the European Monetary System and ultimately reliant on an increase in world trade to deliver an export-led recovery. Keuzenkamp and van der Ploeg warn of the likely consequences both of attempts by the Dutch government to reduce the budget deficit with cuts in education and investment rather than personal consumption and of "benign neglect" of the unemployed in an attempt to induce wage moderation (the recent experience of the United Kingdom comes readily to mind here). B. Van Praag and K. Van Beek examine the financing of the Dutch social security system, in which firms pay a sliding contribution to finance unemployment payments. This practice, they contend, creates higher unemployment as firms are forced to release workers in order to pay for higher social security premiums caused by the initial rise in unemployment. C. de Neubourg's micro-study demonstrating strong negative duration dependence among Dutch unemployed and S. Kesenne's paper on the consequences for unemployment of introducing a universal, unconditional Basic Income are also illuminating and thought-provoking.

The second half of the book provides an international perspective: the contributing authors, who represent Australia, Austria, France, Germany, Sweden, the United Kingdom, and the United States, discuss unemployment policy experiences in their respective countries and the degree to which those policies could be adopted elsewhere. Here again the interested reader can benefit from an array of studies: a cross-country examination of unemployment benefit systems in the context of a job-matching model of the labor market (M. Burda); an entertaining advocacy of further supply-side liberalization in Europe (P. Minford); a reappraisal of the efficacies of demand-induced growth (M. Gregory); an informative overview of labor market policies across the OECD by three OECD economists (P. Schwanse, P. Scherer, and A. Reuterswald); and an analysis of the details and consequences of incomes policies as applied to Australia in the 1980s (B. Chapman and F. Gruen), currently under increasing strain.

Many of the studies make unquestioning reference to the United States as one model of how to maintain relatively low levels of unemployment the other notable example is Sweden. (Unfortunately, the book contains no real discussion of the performance of the Japanese economy.) P. Doeringer's telling contribution, however, illustrates that lower unemployment in the United States, though probably associated with a more flexible labor market, has been accompanied by a rise in low-wage, low-status jobs and a decline in productivity. In contrast, as B. Jonzon demonstrates, Sweden has managed to pursue active labor market programs with the express aim of training the unemployed and those already employed but thought to be at risk. Interestingly, Jonzon also shows that the Netherlands spends around 4% of its GDP on labor market programs compared with Sweden's 2.6%. But 73% of the Dutch expenditure goes toward passive policies, whereas Sweden spends a similar proportion on active measures. Unemployment in Holland, at the time of writing, was five times higher than in Sweden. These studies provide a welcome reminder for policy makers that the art of full employment involves not only reducing the number of unemployed but also attending to the nature and quality of jobs being created.
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Author:Wadsworth, Jonathan
Publication:ILR Review
Article Type:Book Review
Date:Jul 1, 1993
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