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Lessons The U.S. Can Learn From Europe In Dealing With Unemployment

MARY LOUISE KELLY, HOST:

When the coronavirus swept through Europe, it gave the U.S. a taste of what was to come - overwhelmed hospitals and lockdown orders in Italy, shuttered businesses in Germany, France, Spain, worries about the economy across the continent. But here's something playing out very differently in the U.S. and Europe - unemployment. As the number of people filing for jobless benefits here continues to blow out records, in many European countries, it is climbing much more slowly. Joining us now to talk about why is Michael Birnbaum. He writes about this in today's Washington Post, where he is Brussels bureau chief. And he is on the line now from Brussels. Hey there.

MICHAEL BIRNBAUM: Hi.

KELLY: I will kick off by noting that if you're looking at reasons why people in Europe are not losing their jobs in droves, among the reasons is not that the economy there is going gangbusters. You're looking at a pretty lousy economic portrait there too, right?

BIRNBAUM: That's right. Things look pretty terrible. The same round of economic figures that came out today that showed that unemployment actually isn't nearly as bad as in the United States also showed that France, Spain, Italy - and really all around Europe - their economies are shrinking at the fastest pace since World War II. So it's really record-breaking lousiness in Europe overall, but the jobs picture looks a lot better.

KELLY: All right. Well let's, get to why. You described that what is happening in many European countries is the governments there are intervening directly to subsidize salaries, including private sector salaries. Walk me through how it works.

BIRNBAUM: That's right. What is happening is that governments all across Europe are saying that if businesses are thinking that they are going to lay off their employees, they should say, no, no, no, ring up the government and say, government, I'm in big trouble here. Pay between 70 to 87% of the salaries of my workers. In exchange, the employers promise more or less not to lay off their workers. And things just kind of go into a deep freeze. When the economy picks up, the workers can just go right back to work without having gotten laid off. The idea is that it will help spur an economic recovery faster.

KELLY: Are there disadvantages to doing it this way compared to the U.S. system?

BIRNBAUM: Well, the proponents of the U.S. system always say that the advantage is that it's easy for employers to fire people, it's easy for them to hire people, and that that makes the U.S. economy agile. So in a perfect world, here we have the pandemic, and some industries - like the travel industry - is not going to come out well. Some of those jobs just aren't going to come back. In theory, the advantage in the United States is that those workers would get laid off quickly. And in theory, they'd find new jobs somewhere else. A disadvantage of the European program is that it works really well if the economic shock is short, a couple months.

KELLY: Right. I'm thinking, how long can Europe afford to do this? Eventually governments have to pay for this.

BIRNBAUM: Well, these are expensive programs. I did some back-of-the-envelope calculations for the British program, for example, where the government has committed to pay 80% of salaries for four months. If you map the cost of their program onto the size of the U.S. economy, in the United States, that program would cost about $508 billion for three months.

KELLY: Wow.

BIRNBAUM: That's expensive. But when Congress is talking about $2 trillion stimulus packages, it kind of fits in with the scale of what's being done in the United States right now. But it can't go on forever. And if the pandemic keeps economies shut down for a really long time, the risk here is that governments will have spent a tremendous amount of money. And eventually they'll have to give up and they'll just have postponed an unemployment apocalypse.

KELLY: Fascinating. Michael Birnbaum. He is Brussels bureau chief for The Washington Post. Thank you.

BIRNBAUM: Thank you, Mary Louise. Transcript provided by NPR, Copyright NPR.