(FORTUNE Magazine) – If you want to see a real jobs problem, look at Europe. At its lowest, unemployment during the Eighties was still higher than the peak in the U.S. Today it's closing in on 10%, and the Organization for Economic Cooperation and Development projects that it will climb for the rest of the 1990s. Rigid employment laws make European companies even more vulnerable than American ones to technological change and global competition. Employers must offer generous severance pay, notify government agencies months before making layoffs, and negotiate with unions about who gets cut. These rules keep European companies from chopping payrolls at the first whiff of a downturn, but they also discourage hiring when the economy picks up. Dennis J. Snower, a labor economist at the University of London, estimates that hiring in the U.S. begins to recover six months on average after output rises, vs. four years in Britain. European employers are shedding their reluctance to fire as they face continuing economic sluggishness and rising labor costs (see chart). For example, Mercedes-Benz plans to lay off 14,000 workers and Volkswagen 40,000. The uniform labor laws Europe's governments (with the exception of Britain) , are committed to passing should make matters worse, says economist Paul Johnson at the London School of Economics, since they are likely to embody the most restrictive rules of the member countries. Rising unemployment will mean higher taxes -- which will push unemployment up more. Job growth, sluggish already, could atrophy if small employers and entrepreneurs have to pay the same wages and turnover costs as big companies. Warns Snower: ''This would cripple European labor markets utterly.''

CHART: NOT AVAILABLE CREDIT: FORTUNE CHARTS/SOURCE: SWEDISH EMPLOYERS' CONFED. CAPTION: Hourly labor costs