American companies have cut production costs by slicing their head counts to the bone. Now, when the U. S. economy is booming, the spiral of downsizing has left lingering anxiety over job insecurity. That is why salaries have not risen to squeeze profits despite the lowest unemployment in two decades. Europe is finding it hard to compete with lean American businesses because of their high cost of labor. In particular, labor regulations require benefit payments much higher than those paid in the United States.
Regulations requiring large payments to laid-off workers deter French companies from downsizing.
Germany's competitiveness has eroded severely. In order for Europe to compete with the United States it must copy American and British reforms, with deregulation, reduced government spending on social welfare programs and privatization. This American model for economic recovery is not politically palatable at a time when 18 million workers are in the 15 European Union nations are unemployed. Voters across Europe have rejected conservatives and voted in social democrats, who are inclined to respond to social problems such as unemployment with big government spending programs. Voters had earlier turned the conservatives out in Italy and the United Kingdom.