Programme for research and actions on the development of the labour market : analysis of the dynamics of the job creation process in the United States and an evaluation of medium and long term prospects; Volume III: Factor prices, employment, and inequality in a decentralized labour market

This paper reviews evidence on two quite different views of the economic effects of the U.S decentralized labor market on employment and wages: the view that the decentralized market produces wage flexibility which in turn is job-creating; the view that decentralization increased income inequality in the 1980s. It finds that some aspects of decentralized wage flexibility, notably changes in wages by age, have been employment-enhancing while others, changes in wages by industry, union status, employer size category, have probably been "non-competitive" and thus not helped U.S. employment. It also finds evidence of rising inequality in various aspects of economic well-being in the U.S. some of which are potentially attributable to labor market factors. Volume III then develops the assertion that the U.S. experience is better explained by a high level of dynamism and innovation in the U.S. economy, and pinpoints the presence of a strong "entrepreneurial sector" as a primary source of this dynamism. A stage by stage categorization of environmental supports to entrepreneurship is then presented to clarify the elements the U.S. already has in place which nurture this entrepreneurial sector.