Creative Difficulties

Why some countries have more jobs

Why do some industrial economies offer fewer employment opportunities than others? A recent study by the McKinsey Global Institute, an in-house research arm of the management consultant firm McKinsey & Co., concludes that the main culprit is product market restrictions designed to "protect existing interests including existing jobs."

Hence, the reason the United States outperformed other industrial nations in job creation during the decade studied (1980-90) was that the relative lack of regulations in the United States allowed for more innovation and new product development–and, by extension, more employees. Europe's anemic job-growth rates, says Employment Performance, stem from governmental interference with the "natural evolution of the economy," "especially in high-growth service industries." The study, prepared with assistance from such liberal economists as Nobel laureate Bob Solow of MIT and Martin Baily of The Brookings Institution, also documents that, contrary to conventional wisdom, "The wage distribution of service jobs in the U.S. is almost identical to the distribution in manufacturing."