EUROPE'S JOB CRUNCH

By JAY BRANEGAN/BRUSSELS

JOB INSECURITY GOT YOU DOWN? WORried about all those new dead-end, low-pay McJobs that masquerade as gainful employment? Maybe the U.S. should look to Europe, where unions are still muscular, minimum wages high, and most workers insulated from the brutal hire-and-fire culture that characterizes mid-1990s America.

Then again, maybe not. The rich benefits that have made Europe a sweet place to work have clogged its economic arteries. Call it Eurosclerosis--the combination of a staggering tax burden and a blanket of regulations that smother new businesses and entrepreneurship. Symptoms: Europe's unemployment rate of 11% is twice as high as the U.S.'s, and its job-creation chart is a flat line. Over the past three years, the U.S. has created 8.4 million new jobs, Europe none. Significantly, many of those new American jobs pay higher than average wages, and as many as 60% are managerial or professional.

European workers will take to the streets against any attempt to reweave their safety net. Who can blame them? In Spain, for instance, laid-off workers are entitled to 45 days' pay for each year of service. Two weeks is typical for the U.S. But the price of such protection is stagnation. Firing workers, even for cause, is so pricey that employers are reluctant to hire them in the first place. So Spain pays for its kindness with a jobless rate of more than 20%, Europe's highest. Italy, although more entrepreneurial than Spain, has similar laws and an unemployment rate of 12%. Textile-factory boss Marina Salaman of Treviso needs new staff but admits, "A lot of times I hold off hiring because once you've hired someone, it's very hard to get rid of them." Or to keep them. Germany, with some of the top manufacturing pay in the world ($32 an hour, including fringe benefits), is in a panic over rising joblessness, at 11.1% the highest since World War II, because investment is moving to lower-cost places.

Europeans point to underemployment--those low-paying McJobs again--as a gnawing American problem. France's $8-an-hour minimum makes America's $4.25 look cheesy. (President Clinton is proposing a 21% increase, to $5.15, over two years; expect a fight.) No Frenchman works for less, but that means many aren't working at all. Joblessness among young people, hit hardest by minimum-wage laws, is roughly twice France's overall unemployment rate of nearly 12%.

Even those who disdain the American system admit now their own is badly broken. President Jacques Chirac of France, who hosted a jobs summit last week of the seven rich industrial countries, called for a "third path" between the too cozy welfare state and the "precarious" U.S. labor market. Taking the American approach immediately is simply not an option. "Any political party that tried would run into a cultural wall upholding public service, entitlements, paid vacations and so forth," says Jean-Marie Chevalier, a University of Paris economics professor. "They'd be kicked out in one day."

Instead, Chirac's "third path" will eventually lead Europeans toward the American model. They will take it slow: along the way they'll witness more strikes, as in France last December; governments thrown out by voters, as in Sweden; and showdowns between unions and employers, as in Germany now. The politicians could make the ride easier on themselves if they'd start telling people that the destination might not be so horrible after all. --With reporting by Greg Burke/Rome and Thomas Sancton/Paris

With reporting by Greg Burke/Rome and Thomas Sancton/Paris