How to protect household income in the face of the most brutal economic crisis since World War II? To this question, European countries and the United States have, in the wake of the pandemic due to the new coronavirus, provided a response of a profoundly different nature. The former have introduced generous partial unemployment schemes in order to guarantee an income for employees while they wait for them to resume their jobs. The latter let the companies lay off. But to support job seekers, in addition to limited unemployment benefits, Washington distributed them checks for $ 600 per week in the spring.
Result: the unemployment rate has multiplied by more than four across the Atlantic, from 3.5% to 14.7% between February and April, before falling to 8% in September. But thanks to checks, Americans’ incomes jumped 10% in the second quarter. In Europe, unemployment only increased from 6.5% to 7.5% between February and September. Despite everything, household incomes fell by 1.1% in Germany, 2.3% in France, 7.2% in Italy in the second quarter, in particular due to a more violent fall in gross domestic product (GDP ) in Europe (- 13.9%, against – 9% in the United States). At the end of the year, on the other hand, economists believe that after the doping effect of checks, household income should, this time, decline in the United States, hit very hard by the second wave of the pandemic, while they should remain in Europe …
This illustrates the recurring debate between the American and European social models. Which is the most relevant? It all depends on the indicators we are looking at. Europe – in particular, the countries of the West – has chosen to weave a protective net limiting the most painful effects of crises (unemployment benefits and various social protections), more or less effectively depending on the State. Public social spending thus amounts to 31% of GDP in France, according to the Organization for Economic Cooperation and Development (OECD), 28.2% in Italy and 25.9% in Germany, against 18.7% in United States. Thanks to these social shock absorbers, recessions are, in general, less painful for households, but the economy rebounds less quickly.
“Social safety net more limited in the United States”
You have 61.34% of this article to read. The rest is for subscribers only.
