For workers in Europe, US, distinct aims

Protests on both sides of the Atlantic show two faces of labor struggle.

On the surface, protests on both sides of the Atlantic bear a remarkable resemblance: Tens of thousands marching against measures that would affect their livelihoods.

But the contrast is sharp.

In France, more than a million demonstrators are defending their access to a rigid system where a job, once found, often lasts for life. They plan to rally again Tuesday to oppose a law that makes it easier for companies to fire young workers.

In America, throngs have hit the streets to defend their access to a very different job market, one of the world's most freewheeling. As immigrants, legal or illegal, they simply want the opportunity to work - even though there's no guarantee of a steady paycheck.

The issue on both continents, say economists, is the flexibility of labor markets. It's not a slogan on marchers' signs. But the question of flexibility - whether it's measured in pink slips, green cards, or the minimum wage - distinguishes the American economy from many European ones.

"[In Europe] they want more job protection. No one in Los Angeles is asking for protection from being fired," says Diana Furchtgott-Roth, an economist at the conservative Hudson Institute in Washington. "That's why one has very high unemployment, Europe, and one has very low unemployment, the US."

The high-stakes choices each continent makes on labor policies will affect their societies for decades to come. Both have tough roads ahead in assimilating immigrants, supporting more elderly citizens, and competing with new powers in Asia But many economists say that America's more-nimble job market holds an advantage. And in European nations, rigid policies threaten progress.

"They could make the changes they need to make, and move forward, or they could get left behind," says Martin Baily, an economist at the Institute for International Economics in Washington. "The US is better off. We have a full-employment economy."

The implications go beyond financial well-being. The character of labor markets could shape not just living standards but also social cohesion and political or military clout.

Tough road ahead for both economies

The United States and Europe will almost certainly see their share of the world's economic output decline in the decades ahead, as countries such as China and Brazil see theirs rise. But the relative decline looks steeper for Europe.

Some forecasters, for example, expect European economies to grow by an average of just 2 percent a year through 2025, compared with 3 percent a year for the US and nearly 4 percent a year for the world as a whole.

In this scenario, used by the US Department of Energy in its annual outlook, Western Europe and the US each represented about 20 percent of the world's gross domestic product (GDP) in 2002. By 2025, America would retain an 18 percent share, while Western Europe's share would shrink much further - to 13 percent of world GDP.

Another projection, by researchers at the Organization for Economic Cooperation and Development, paints a grimmer picture. Assuming "unchanged policies, and with population aging," they warn that economic growth in the euro currency zone will slow to a pace of just 1.3 percent a year through 2020, and 1 percent after that.

"The writing is on the wall" regarding the need for labor flexibility, says Irwin Collier, an economist at the Free University, Berlin. "But the issue is: Can the institutions change as fast as the world changes?"

Making it easier to lay off extraneous workers can spur job creation, experts say, because corporations know they can always downsize if needed.

The current protests in France, and a tightly split election in Germany last year, signal that Europe's core economies are still struggling to grapple with the issue.

French President Jacques Chirac signed the labor measure, known as the First Job Contract, into law Sunday, but called for a softer version to replace it. That hasn't stopped protesters from planning another nationwide demonstration Tuesday.

European nations are reluctant to merely mimic the United States. They want to maintain work cultures that tend to include more leisure time, a narrower gap between the rich and the poor, and a stronger social safety net.

But economists say that Europe can find its own form of greater flexibility.

The times, they say, demand it. The current era is one of upheaval, driven by forces such as globalization, new technologies, and the shift toward service-based industries.

"Those things are changing the economy, and requiring some kind of flexibility," Dr. Baily says.

Some European nations have charted their own paths of reform and prospered, he says. Denmark, Sweden, Ireland, Britain, and Spain are examples.

And workers in Germany, France, and Italy are productive - when they're on the job. Key challenges are high unemployment and underemployment of workers.

The European Union's jobless rate was about twice America's last year.

During the past three decades, GDP per person in Europe has stayed about 30 percent lower than the US level. The reasons include a preference for shorter work weeks, but some economists say labor policies may keep people from working as many hours as they'd like.

If one problem is producing jobs, another is producing enough workers. Europe's population far exceeds the US now, but it has virtually stopped growing.

With fertility rates too low to replace the population in nations such as Italy and Germany, Europe may see slower economic growth simply because it has fewer workers. That, in turn, could force some changes to pension and healthcare systems, as more people live longer during retirement.

In the long run, demand for immigrant workers may rise. But for now, assimilating immigrants is proving to be difficult for many nations in Europe - as attested last November by a different set of riots in France, led by Paris-area immigrants of African descent.

Across Europe, the fear of Islamic fundamentalism and what many see as failed integration policies have led to distrust between nations and their immigrant communities.

"European countries have never defined themselves as immigration countries. They've had it as a kind of accident. They don't see it as desirable," says Rinus Penninx, a migration expert at the University of Amsterdam. "That's why there are no good ... proactive immigration policies."

But for all the challenges Europe faces, the US has its own troubles with labor and immigration policies. The typical American worker isn't necessarily marching in the streets, but millions feel anxiety about job security, global competition, and stagnating wages.

The fruits of America's recent prosperity have gone disproportionately to the wealthiest in society - a trend that could eventually fray the social fabric.

"It does seem as though the US economy is more dynamic than the European economy," says James Parrott, an economist at the Fiscal Policy Institute, a liberal research organization in New York. "But dynamism that is also characterized by greater extent of layoffs, real wage declines, and dramatically greater income inequality is not necessarily a good thing."

Some economists say Europe constricts job growth with its high minimum wages, but he says the US is overdue to boost its minimum wage. States that have put a higher floor on wages, he says, have not suffered smaller job gains as a result.

The wage issue is just one example of labor-related issues that could play a significant role in some US election campaigns this fall.

Coming to grips with immigration

Immigration is even closer to the political forefront.

A nationwide chain of protests against a possible crackdown on illegal border crossings continued this weekend, with a major demonstration in New York City.

But other Americans, equally passionate, say an unchecked tide of unlawful entrants is eroding wages and job opportunities for many legal residents - while burdening taxpayers with higher costs for school and healthcare.

In the end, it appears possible that Congress could move to tighten border enforcement while also opening a path toward legalization, and perhaps citizenship, for millions who are now in the US illegally.

But however that debate unfolds, America continues to generally embrace immigration as a net benefit.

The details of immigration and labor policy may take years to work out. To some observers, the "flexible job market" is merely code language for policies that favor big business while squeezing workers or allowing their jobs to be shipped overseas.

Economists have yet to agree on a recipe for mass prosperity in this era of global competition.

But advocates of flexibility say that this trait, deep-rooted in America's history of always exploring the next frontier, remains a key to success.

That's because it enables American businesses, and their employees, to profit from changing opportunities.

Millions of workers lost jobs last year, but those shifts allowed the economy to redeploy capital to more-productive uses. And in the end, the new jobs created outnumbered the ones lost by more than 2 million, says Ms. Furchtgott-Roth. "The American economy is very dynamic."

Andreas Tzortzis contributed to this report from Berlin.

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