Economies grow through incentives or the lack of disincentives for business investment. In pro-business countries like the US, the cost to lay off an employee can range from two weeks to six months of the person’s salary. In pro-labor countries, like many in the Europe Union, the cost to lay off an employee can exceed two years of the worker’s salary, even if he worked for only a few months.
This creates a rather large disincentive to invest in new businesses in these countries. It also makes it difficult for existing companies to lay off existing workers in favor of cheaper offshore labor, suppressing the ability of these companies to undertake new opportunities. Pro-business countries remove obstacles to both business Destruction and business Creation. This stimulates investment, resulting in economic growth and higher standards of living for their citizens.
By contrast, pro-labor countries buy votes by enacting pro-labor legislation, such as minimum wage or employment guarantees that stifle investment, resulting in low or negative economic growth and an overall lower standard of living for their citizens. The economic issues facing many European countries are rooted in their desperate attempts to hold onto old manufacturing era jobs by creating an array of disincentives for businesses that are ultimately crippling their economies.
