The United States has always had relatively competitive goods and labor markets,
compared with Europe for example. But the last two decades have seen a further
movement in this direction, including the initially unpopular corporate restructuring of
the 1980s and the initially popular dot-com start-up firms of the 1990s.12 Particularly
important are our labor markets, which are substantially more flexible than Europe’s.
Even though many of Europe’s labor regulations were designed with the intention of
protecting employment in Europe, they have often had the effect of retarding growth in
employment. It is because our labor markets are flexible that we were able to create 17
million new jobs between 1991 and 2000. During this period, the working-age
population increased by 14 million. In other words, private employment expanded so
rapidly that we easily absorbed a reduction in the number of people in the military plus a
substantial number of immigrants, while simultaneously bringing the unemployment rate
down from 7 per cent to 4 per cent.