Aparna Mathur, resident scholar at the American Enterprise Institute, has some observations that are particularly pertinent in a time of high unemployment:

Labor market regulations often take the form of employment protection rules that govern the hiring and firing of workers. These were originally introduced to enhance workers’ welfare; for instance, by reducing unfair dismissals. The same provisions that protect employees, however, translate into cost for employers, leading an employer to think twice (at least) before hiring a new employee.

Interestingly, the subject of Mathur’s piece was not unemployment but education. He began with a famous quote from Plato to the effect that people don’t learn unless they want to. Rigid labor markets, according to Mathur, decrease the incentive to learn:

Under rigid labor market regulations, employers have a stronger disincentive to create new jobs, so there are fewer available jobs on the market. As a result, one’s likelihood of earning a productive wage is reduced. Moreover, firings under a system of strong labor market regulations are less frequent than they would be otherwise, so even workers with jobs expect to face fewer opportunities to search for re-employment. As a result, they will have less use of education as a signaling device to secure their next job.