Governments are piling in with short-term help for workers. In America, which has one of the lowest social safety nets in the rich world, extending unemployment benefits was, rightly, part of the recent stimulus package. Japan is giving social assistance to “non regular” workers, a group that has long been ignored. In general, however, it makes more sense to pay companies to keep people in work than to subsidise unemployment. Many countries are topping up the earnings of workers on shortened weeks or forced leave.
These are sensible measures, so long as they are time-limited; for, in the short term, governments need to do all they can to sustain demand. But the jobs crisis, alas, is unlikely to be short-lived. Even if the recession ends soon (and there is little sign of that happening), the asset bust and the excessive borrowing that led to it are likely to overshadow the world economy for many years to come. Moreover, many of yesterday’s jobs, from Spanish bricklayer to Wall Street trader, are not coming back. People will have to shift out of old occupations and into new ones.
Over the next couple of years, politicians will have to perform a difficult policy U-turn; for, in the long term, they need flexible labour markets.