Layoffs, underemployment and a still-meager safety net aren’t hurting only U.S. workers. The failure to provide much economic security for average Americans is likely to wound companies and the economy overall. It’s probably doing so already.

What I’m getting at is the way shell-shocked, struggling individuals may make less-than-optimal choices because they’ve become so risk averse. When people pick jobs out of fear or an obsession with financial safety, they often end up in positions where they don’t thrive. And by passing on a job that would have been a better fit but may have entailed a bit less money or more risk, they deny that firm an engaged, enthusiastic employee. It’s suboptimal all around.

Even top performers are saying security is a top priority. In fact, they want it more than do employees overall, according to a recent survey by consulting firm Watson Wyatt Worldwide. Job security was cited as a reason for joining an organization by 37 percent of top-performing employees.

That made it the second-ranking reason after “nature of work” for top performers. Thirty-three percent of all employees cited job security, tying for second place. Employers, meanwhile, appear clueless about this stability focus: Security didn’t make the top-five list for employers when asked why employees join an organization.

The recent career deliberations of a friend flesh out the point. He had two job offers in hand: a stable job he didn’t think he’d love and a position at a startup that is riskier but the kind of work he’s been fantasizing about. He eventually went with the startup, but came very close to turning down his dream job.

In particular, at one point he felt he couldn’t take the post without a guarantee of severance pay in case the job fell through. This demand, which the startup would not agree to, is unusual for midcareer business consultants like my friend.

But it is understandable given his recent economic experience. After losing his job nearly a year ago, he has been unemployed or underemployed as an independent consultant despite holding an advanced degree with a focus on China from an elite university. Without work, he has faced the loss of a cherished private school for his kids, home foreclosure and strained relations at times with his spouse.

And yet a dispassionate look at my friend’s work situation showed him getting an increasing number of consulting projects, two recent full-time job offers (the ones he was weighing) and growing economies in both the U.S. and China. His prospects would be good even if the startup flopped in a few months.

In other words, he was approaching his job choice with the scars of economic insecurity distracting him. And they came close to keeping him from a choice likely to benefit both him and the startup.

The severance issue was not my friend’s only concern with the startup job, but it was a major one. Eventually, he dropped that demand and took the leap. But how many of the country’s millions of unemployed and underemployed are going for the safer bet? How many will go for the safer bet in the months and years ahead?

Yes, we’ve made some improvements to the safety net. But jobless payments remain proportionately lower than those during the Great Depression, and health care continues to be a concern for many.

Companies overall were quick to ax employees during the recession. And they are rehiring slowly.

If economic life for Americans is akin to climbing a mountain, we’ve allowed that journey to become very hazardous, very slippery. It’s easy to lose your footing or get knocked off your feet and tumble down far. Firms want people who are eager to take risks and rise to new heights. But don’t be surprised if battered and bruised Americans instead seek refuge in low-lying caves—to the detriment of all.

The U.S. is taking small steps toward looking like Sweden and the Netherlands when it comes to the economic safety net. And those aren’t bad places to be, whether you’re an employer or an employee.

A recent report from the National Employment Law Project advocacy group shows many U.S. states are changing their laws on unemployment benefits to qualify for $7 billion in funding included in the stimulus package signed by President Obama earlier this year. Those state modifications amount to expanding the reach of unemployment insurance to cover more low-wage workers as well as other groups including part-time workers.

Over the past four months, 25 states have enacted unemployment insurance reforms that qualify for incentive funding, according to the National Employment Law Project.

In addition, according to the project, 21 states changed their laws to provide “extended benefits” when their unemployment rates reached 6.5 percent, helping about 1 million workers who are exhausting their state and federal benefits.

Apart from expanding the coverage and duration of jobless benefits, the stimulus package boosted weekly payments by $25. U.S. unemployment insurance checks have been paltry: The average weekly benefit in 2008 was $297, or just 35 percent of the average weekly wage.

Those payments have been part of a skimpy safety net overall in the United States. Other developed nations have had much more generous jobless benefits, with northern European countries such as Denmark, Sweden and the Netherlands among those providing the most assistance.

Such social welfare policies typically carry the price tag of higher taxes, either on corporations or individuals. Higher tax levels also have been accused of slowing economic growth. In the first quarter, both Sweden and the Netherlands saw their economies contract at a faster pace year-over-year than the U.S. economy did.

But those two nations outperformed the U.S. in another key measure of business strength earlier this year. Public relations firm Edelman’s annual trust survey found that while trust in business plunged in the U.S. and slipped worldwide last year, it rose in both the Netherlands and Sweden. (It also rose in fast-developing Brazil and China.) Just 38 percent of U.S. respondents to the survey said they trust business to do what is right, compared with 62 percent of respondents from the Netherlands and 51 percent of respondents from Sweden.

In addition, the survey found that the most trusted global companies are headquartered in Sweden. The Netherlands ranked fifth on that list, behind Germany, Canada and the U.K.

Given how important trust is among an organization’s employees and in the broader consumer population, those northern European countries and the businesses located there are well-positioned to climb out of the current global recession.

I would argue that part of the business trust in Sweden and the Netherlands has to do with the fact that citizens in those countries have a significant degree of economic security. If a firm goes out of business or someone loses a job, the ability to survive and provide for a family isn’t nearly as jeopardized as it is in the United States. In America, getting the ax hurts a lot more. And that pain likely translates into anger at companies.

If the U.S. is looking for guidance out of the current trouble, it could do worse than to follow Sweden and the Netherlands.

“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.