The US really stands out that way. Across Europe, just about everywhere you can’t just fire someone who’s been working for you for years. You owe them severance pay, you at least have to give them a warning.
This has huge implications on the life of the people and the society as a whole. Being under the risk of getting fired any time, people put in more and more work hours. The basic idea being, that if you work just a little more then everybody else, then you are safe. Obviously, the problem is that if everybody thinks like that, we finally have this overworked nation of Americans.
Based on the OECD the average American works 1778 hours a year, whereas the Germans only work 1409 hours. This is over 9 weeks they work less. Can you imagine what you could do in all this time? Why is that? Maybe because Germans still have Unions and 6 weeks holidays? But here comes the best part: the Germans have a better productivity than Americans. Maybe it’s because they are more motivated, since they had some time for leisure with their families, went to cultural events, payed a sport and have a hobby?
We all know you are not more productive if you spend the whole day doing work, its moreover those productive hours that count. However, even the most productive person won’t leave the office if it’s at the risk of being fired. Moreover, this gives also large incentives to work more hours for free, come in at the weekend and so on, simply because of being afraid to loose the job. A phenomenon you can widely see in the North America, but its more uncommen in Europe. In many European companies its actually forbidden access the office at the weekends, simply the keys don’t work.
Finally, no wonder that the American society is more and more ignorant. Who has time and energy for books, society, other cultures and things like that if you are constanly working? That when you turn to easy fun like cars, movie stars and fast food. Are we still surprised that Americans are that fat?
We know there’s externalities in the sense that you lay off a worker in their early 50s, they have a hell of a time getting re-employed. Many never will. So they’re going to collect unemployment benefits, in addition to the harm it does to the worker, so it’s reasonable to say there are serious externalities here. If someone’s really not pulling their weight and you’re paying them, fine, get rid of them, but give them something to go away on. And if that prevents you from doing it, well then, maybe they’re not that much of a drag.
Often in the US you would hear, that those policies would decrease competitiveness and productivity, but interestingly if these policies prevent from firing, then maybe the guy you wanted to fire wasn’t that bad after all. Finally, global companies will lay off first in countries like the US before they do it in Europe, because it’s less complicated and if the jobs are once moved to China or India they are very unlikely to ever return.