Both the USA and the EU need to create more private sector jobs. In both the American and European continents unemployment is too high. Tax revenues are depressed and social expenditures large as a result.
Both the EU and the US authorities are taking actions which make private sector job creation more difficult and dearer. In the USA there are many corporate worries about President Obama’s Health care plans. Most agree on at least one thing – companies on average will have to pay more for the health insurance for their staff. Many company pension funds are languishing with deficits. The poor performance of US shares over the last decade has hit them, as many of these plans are substantially invested in domestic equity. Companies have to put more money into them. This background makes employers cautious about hiring more people.
In the EU the lawmakers are moving towards a big new raft of financial services regulation with new supervisory authorities. Taxes generally are rising in Europe, including taxes on employment and earnings. The USA too is busily putting in more Wall Street and banking regulation.
The creators of jobs and success in Shanghai, Singapore, Hong Kong, Mumbai and other dynamic centres must be rubbing their hands with glee as they see all these moves. Of course the west needs to learn from the big regulatory and management mistakes made during the Credit Crunch. That does not mean we need new regulators and more box ticking. It means we need Central bankers and lead banking regulators with better judgement. The old regulators and central bankers did not lack numbers of staff or powers. They simply got the judgement wrong, allowing too easy credit up to 2007 and then tightening too much too quickly to correct it.
The problem today is very different from the problems in 2006-7. Then the issue was excessive lending and credit. Today it is slow recovery held back by banks that cannot lend enough under the new rules and by companies that are happy to hoard the cash they generate for fear of more problems like 2008-9. The more western governemnts make it dearer and more complex to do business, the more the brake will drag on the recovery.
In the USA employees naturally value their healthcare plans, given the US health system. They also value their jobs, as the US incentives to work are more sharply defined than in some European countries. The President was doubtless well intentioned in his bid to raise healthcare insurance standards, but it raises the costs of US labour relative to other competitors. It will be good for productivty, and bad for the rate of job growth. The general fashion to much tighter bank regulation in the west will mean a slow recovery.