Change Is Good

But government makes it tough.

Does economic change inevitably mean economic dislocation? A new study by the Organisation for Economic Co-operation and Development, an international advisory group, concludes such change is natural, progressive, and salutary. Unemployment, says the report, stems from "policies…[that] have made economies rigid, and stalled the ability and even willingness to adapt."

The study surveys employment trends from 1950-95 in the 25 OECD countries (most of Western Europe, North America, Japan, Australia, and New Zealand) and finds that weaker performances in long-term employment, job growth, and other economic indicators reflect attempts to rebuff change.

"Motivated to protect people from at least the worst vicissitudes of economic life, governments, unions and businesses have progressively introduced labour market and social policy measures and practices which, in achieving their intended ends, also have had the unintended but more and more important side-effect of decreasing the economy's ability…to adapt," says the report.

The report makes a number of policy recommendations, all geared to maximize an economy's ability to adapt to change. They include: promoting flexible work schedules by reducing restrictive labor laws; encouraging entrepreneurship by "removing red-tape, regulations and controls that discourage new and expanding enterprises"; reducing non-wage labor costs such as social security and other payroll taxes; eliminating or varying minimum wages by age and region; and dismantling product-market barriers.

"The basic policy message of this report is unambiguous," says the report. "[U]nemployment should be addressed not by seeking to slow the pace of change, but rather by restoring economies' and societies' capacity to adapt to it."