“Old” Europe is suddenly the new new thing.

Deepening gloom about the recession and job market is opening up debate in America about whether European-style employment and social welfare programs may prove to be a vital part of a healthy economy for employees and employers alike.

The sturdy safety net of universal health care, generous unemployment benefits and relatively secure pensions often has been derided as anti-entrepreneurial and part of the reason for Europe’s relatively high unemployment.

Indeed, those benefits and strong job protections may have played a role in high jobless rates in European nations such as Germany.

But now it appears ample jobless benefits and the like are cushioning the blow of the global recession. Government-provided health care helps prevent public panic around layoffs in Europe. And unemployment benefits that can cover 70 percent of net earnings or more for years at a time fuel continued consumer spending.

With the stimulus plan passed earlier this year, the U.S. took some steps in Europe’s direction. A COBRA subsidy makes it much easier to maintain health insurance after losing a job, and states were encouraged to loosen eligibility rules for unemployment insurance. In addition, jobless benefits were bolstered by $25 a week and the extended unemployment benefits program—which provides up to 33 weeks of additional benefits—was continued through 2009.
 
Even so, U.S. workers still face the prospect of running out of jobless benefits after about a year. And despite the $25-per-week boost, U.S. unemployment insurance checks are paltry: The average weekly benefit in 2007 was $288, or just 34 percent of the average weekly wage.

What’s more, many out-of-work Americans don’t receive unemployment benefits.

Amid evidence of increased employer aggressiveness in challenging jobless-benefit claims, the rate of recipiency—which captures the percentage of unemployed people who have qualified for and are claiming benefits—was 45 percent in the third quarter of last year when considering all unemployment insurance programs.

The stimulus act’s eligibility reforms should bring that number up. But all the insecurity built into the U.S. economy has already pushed people into their shells. Americans have been spending less at a time when companies need their business.

Better benefits for those out of work in Europe may help explain why economic contraction in the European Union in the fourth quarter of 2008 was not quite as severe as the shrinking in the United States.

Also finding its way into the spotlight is a German program to preserve jobs through reduced hours and wages. Similar “work sharing” programs in the U.S., where businesses can cut employee hours and pay but government helps make up the difference, exist in just a minority of states. But those programs are getting more attention, as is the idea of a tax credit for paid time off.

European countries also have been lowering payroll tax rates, another intriguing idea for battling the recession.

Critics who claim Europe should invest in larger stimulus programs—closer to the scale of the U.S. effort—may have a point. But it seems clear we, too, have some lessons to learn from our friends across the pond. “Old” Europe could help a sluggish America put a spring back in its step.

An economic stimulus idea now gaining currency is a natural fit for the HR community.

The proposal is a payroll tax holiday, and it could be a win-win-win for workers, employers and the concept of a sustainable economy.

A payroll tax holiday would involve suspending for a year or two the federal taxes now levied to pay for Social Security and Medicare. These taxes are tied to wages, hit both employers and employees, and amount to more than 15 percent of much of the wages paid in America.

Because it’s a tax break, a payroll tax holiday appeals to Republicans. And as a means to put money in the hands of average workers, it appeals to Democrats.

Indeed, this approach to goosing the economy has found support among both camps. Senate Republican leader Mitch McConnell and the former Labor Secretary in the Clinton administration Robert Reich both have endorsed some version of the idea.

Recently, the lead commentary piece in The New Yorker magazine backed a payroll tax holiday, another signal that the notion is gaining momentum.

Fatter paychecks would put a smile on employees’ faces.

Pausing payroll taxes makes sense for employers, too. Businesses would have a lighter tax load and a happier workforce, which would get a de facto raise even amid salary cuts and pay freezes. Plus, workers are likely to spend more, stimulating the demand that companies desperately need these days.

Of course, there’s a catch to putting the kibosh on payroll taxes. It jeopardizes the funding for Social Security and Medicare.

But as Hendrik Hertzberg writes in The New Yorker, those programs are too well-entrenched to be imperiled by a payroll tax holiday. In fact, he calls for eliminating the payroll tax altogether and replacing it with taxes on things we as a society want to get away from, like pollution, oil imports and excessive consumption.

“This wouldn’t be just a tax adjustment,” Hertzberg writes. “It would be an environmental program, an anti-global-warming program, a youth-employment (and anti-crime) program, and an energy program.”

Advocacy group Get America Working! argues that shifting from payroll taxes to equivalent taxes on materials, energy and land ultimately “would create tens of millions of jobs, help the environment, and in all likelihood lead to a net tax reduction.”

Radically changing the tax structure is an ambitious goal. But as Hertzberg suggests, the economic crisis at hand opens the door to dramatic changes like eliminating what is essentially a tax on work.

HR folks could be among those saying this is change we can believe in.

Here’s one way companies can avert public relations problems associated with layoffs: disclose, disclose, disclose.

As it stands, employers often are not forced by law to admit when they engage in modern layoffs—of the 5 to 15 percent of headcount variety. California is a rare exception, with its notification law triggered by a layoff of just 50 employees.

But in an era of Facebooking, Twittering and other forms of electronic self-expression, stories about job cuts are going to be told.

“There’s no ability for a company to control the message like they used to,” Jennifer Benz, a San Francisco-based communications consultant, told me recently.

She points to Telonu.com, a site that welcomes stories of layoffs. At Glassdoor.com and Vault.com, ex-employees also are invited to talk about their old firms.

The New York Times recently reported on some 4,600 North American job cuts at IBM.

“The cutbacks surfaced only because of their size and timing, with word spread through blogs, employee message boards and [union group],” the Times said.

I, for one, back an idea raised in the article: requiring large corporations to annually report employment country by country.

“All our multinational companies are increasingly less American, except when they are asking for tax breaks and increased government spending in their industries,” Ross Eisenbrey, a researcher at the labor-leaning Economic Policy Institute, is quoted as saying. “Knowing where their employment really is would be useful information for policymaking.”

Whether that rule ever comes to pass, smart firms are getting in front of this issue. They’re disclosing their cuts and explaining them. Examples include online retailer Zappos.com and software giant SAP.

The public may not love hearing about more job-loss woes. But people—who include potential customers and future employees—will be much more sympathetic to the transparent company than the one whose layoffs only surface when angry ex-workers vent.

At first blush, the recent news that Caterpillar is cutting its workforce by more than 20,000 people seems like another sign that American companies are in grave trouble during this recession.

But Cat’s story is more complex, as I recently learned during a face-to-face interview with Sid Banwart, the company’s chief HR officer. The iconic maker of 20-foot-tall trucks and other heavy equipment has been taking people management steps during the downturn that may result in Cat purring happily a few years from now.
 
For one, the Peoria, Illinois-based manufacturer is reducing its workforce according to a certain long-term logic. Banwart said that about 8,000 of the 23,000 jobs getting cut affect Cat’s “flexible” workers: contract, staffing-agency and part-time employees. Excluding its flexible workforce, Caterpillar’s headcount at the end of 2008 was nearly 113,000.

There’s a debate about whether the rise in temp and contactor jobs is a good thing for American workers, especially given the historic weakness of the U.S. safety net. Still, temps and contractors can help companies preserve key employees during downturns and ramp up quickly in a recovery.

Indeed, Banwart says Cat’s move to largely trim its flexible workforce follows a deliberate strategy to handle troughs in its business cycle. The plan is designed not only to lower costs in a recession but also to allow the firm to hold on to long-term talent. “It’s actually worked out quite nicely for us,” Banwart says of the strategy.

Even though it is cutting workers, Cat has made it clear that executives also are sharing the pain. In December, the company said executive compensation for 2009 would be cut by as much as 50 percent, while compensation for senior managers would be slashed 5 to 35 percent. Cat also suspended merit pay increases for management.

In chopping the overall pay of executives, Cat is tapping into a national mood of shared sacrifice and intolerance for fat-cat excesses. “We believe it is important to lead by example,” Banwart says.

What’s more, the equipment maker is doing its best to avoid getting stuck in the recession rut. Banwart says Caterpillar is looking ahead to 2020, when it sees revenue possibilities of $100 billion—double the $51 billion it took in last year. The downturn will pass, in other words, and the world will return to building schools, hospitals and roads.

“This is a time when we emphasize the power of the ‘and,’ ” Banwart says. “We must deal with the current reality and maintain the ability of the company to grow following the downturn.”

For example, Cat plans to spend $1.5 billion on research and development this year, Banwart says. And Cat is continuing efforts to develop future managers. Between now and 2020, Banwart expects the company to need thousands of new leaders.

It’s too early to say whether Cat has pounced properly with its cutbacks or if it has acted like a corporate ’fraidy cat—with potential harm done both to its employee morale and ability to ramp production back up quickly. Banwart says voluntary turnover has “shrunk almost to zero.” But that could be a reflection more of the dire job market than commitment to the company.

A key test will be if Cat’s employee engagement scores continue their seven-year rise despite tough times. If they do, that will be a good sign that this Cat, while wounded, has a lot more life in it.