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As US goes on creating jobs, Europeans may ask Reagan: `How?'

By DAVID R. FRANCIS / May 5, 1986



THE US economy keeps spitting out jobs the way an electric popcorn popper pops popcorn. During the first four months of this year, the economy has created almost 1 million new jobs. In April, civilian unemployment remained at 7.1 percent of the labor force. But the Labor Department reports that the 8,342,000 Americans seeking work was a decline of 77,000 from March.

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President Reagan, in his State of the Union message Feb. 4, stated that ``the United States is the economic miracle . . . the model to which the world once again turns.''

Every so often Reagan administration officials like to talk about this phenomenal capacity of the nation's economic machine to produce jobs. Probably the West European leaders are getting an earful of such boasts at the economic summit in Tokyo.

Canadian Prime Minister Brian Mulroney will be immune to this talk. On a proportional basis, the Canadian economy has done even better in creating jobs during this recovery.

The European economies have been lagging behind, however. Between 1975 and 1985, there was only a modest increase in jobs in France and Italy and absolute declines in Belgium, West Germany, and the United Kingdom.

Why?

Bank of Boston economist James Howell explains the lag as due in large part to labor costs in Europe, especially the recent sharp rises in wages and fringe benefits as well as the indirect costs of restrictive work practises.

According to a recent study by this country's Business Roundtable, US manufacturing workers get fringe benefits that average 39 percent over and above their hourly wages. For Europeans, the share of this extra compensation above hourly wages is about 75 percent in West Germany, 80 percent in France, and 87 percent in Italy.

European employees typically get longer vacations, more expensive medical plans, and other costly benefits.

``Moreover,'' Mr. Howell writes, ``these add-on costs are typically less in the areas where the US has experienced its fastest job growth in recent years, especially among the non-unionized sophisticated services and high-tech sector.''

The April employment figures show the creation of 270,000 jobs in the booming service and construction industries, offsetting smaller declines in factory jobs and the oil and gas industry.

Another thing helping the US economy is its relative freedom from what Howell terms the ``excesses of the welfare state.''

``Indeed,'' he says, ``recent actions by the Reagan administration -- specifically, cuts in both business and personal taxes together with ongoing efforts to promote a less oppressive regulatory climate -- have fostered US growth and contributed to a more competitive business environment.''

Howell further points out that subsidies to capital investment in Europe have encouraged business to use more machinery and equipment per job created.

What's to be done in Europe?

Mr. Howell suggests that it is ``a most appropriate time'' for Europe to pursue stimulative growth policies. And this must be complemented ``by steps to make labor markets more efficient and to reduce burdensome regulations.''

Meanwhile, the US economy promises to continue churning out jobs. Lacy H. Hunt, an economist with the CM&M Group, calculates that business could create 1.75 million more jobs by the end of the year, in addition to the 1 million already produced this year. Unemployment should drop to 6.7 percent by December.

That, he says, is an ``excellent'' performance.

Columnist Richard Nenneman is on vacation.