A Strategic and Integrated Labor Market Approach: Essential to Overcome the Crisis and to Assist Structural Adjustment

Comparing the papers on the Korean and the U.S. situations leads to interesting conclusions. Cho and Shin argue that the recent crisis did not create huge problems in the labor market because Korea was firstly in a fundamentally sound economic situation and secondly took adequate anti-crisis measures, in particular by stabilizing internal demand. This allowed Korea to "get through" the crisis without major cuts in employment or GDP. This was not the case in the U.S., as the Neumark and Troske paper points out. Taking into account that the American housing market was at the heart of the crisis, it is obvious that the U.S. could not deal with the crisis as an external phenomenon. In that sense, the papers point to the conclusion that it might be more adequate to compare the impact of the Asian crisis in 1997 to 1998 on Korea with the impact of the recent crisis on the U.S. In both cases, the countries faced significant national structural problems when they were hit by the crises. This corresponds to the experience in the EU during the recent crises. Those countries that overall were rather competitive and where the burst of the internet bubble in the early 2000s had led to a consolidation and structural reforms performed rather well. In contrast, the global crisis hit the national economy much more severely in those countries where the economy had grown very fast for several years or where significant structural imbalance persisted. The structural importance of investment in human capital is highlighted in the papers from Haveman, Heinrich, and Smeeding and from Neumark and Troske. The EU's main financial instrument for investing in human capital is the European Social Fund (ESF) put in place with the treaties establishing the European Economic Community back in 1957. The ESF is devoted to promoting sustainable employment in the EU. In practice the ESF works alongside national and regional active labor market and training instruments. Given its high flexibility in implementation and its integration into national or regional strategies, awareness of European citizens about this instrument is widespread, and when people know about the ESF they support its policy goals. In summary, the reaction to the crises and its immediate aftermath clearly calls for a mix of methods and tools, and for integrated programs with a reasonable mid- to long-term perspective. This is not always easy to ask for given the rather short timespan during which political initiatives are expected to deliver results. (Contains 2 footnotes.)