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InsiderOnline Blog: October 2004

Courageous Common Sense

Glenn Reynolds points out a courageous statement of economic common sense in Europe from the Dutch Minister of Economy. Why is Europe's standard of living so much lower than America's? Why is the GDP-per-capita in countries like France, Germany and Italy almost $10,000 lower than it is in America? As Bruce Bartlett says in "The Productivity Gap,"

Europeans produce no more per year than Americans did 20 years ago.

and

On average, Europeans only live about as well as those in the poorest American state, Mississippi.

No offense to Mississippi (though comparing them to Europeans is probably the quickest way to jump-start the economy. What better incentive to risk capital than to avoid being pegged as the "Euros of the South?" ). So what's the problem? As the Dutch economist points out, it's that Europeans simply don't work as much as Americans do. Bartlett offers some figures:

According to the Union Bank of Switzerland, the typical European has 2 to 3 times as many paid days off per year as Americans. And according to Eurostat, Europeans don’t put in much of a workday, either. According to the report, the typical European only does a bit more than 5 hours of gainful work per day, with Norwegians at the low end at 4 hours, 56 minutes per day, and (surprisingly) the French at the high end at 5 hours, 44 minutes per day.

According to a new report from the Organization for Economic Cooperation and Development in Paris, last year the average American worked 1,792 hours. By contrast, the average Frenchman worked just 1,453 hours and the average German worked only 1,446 hours. Twenty-five years ago, annual hours worked in Europe were much closer to those here.

But it wasn't always this way. Years ago, before the government started taking 50-60 percent cuts in taxes, hours worked in Europe were much closer to the American figure.

In short, Europeans don’t work because it just doesn’t pay to work after the government takes its cut. And because welfare benefits are so high, the cost of not working is low. Thus, when workers compare what they make after-tax with what they can make by doing nothing, the gap is very small.

Of course, pitching a change in work culture to Europeans as a move toward the "U.S. social model" might not be an easy sell. Olaf Gersemann, a German economics writer who lives in the U.S., explains why in "Cowboy Capitalism":

Most Europeans (and many American pundits) are woefully uninformed about comparisons between life in America and life in Europe. German chancellor Gerhard Schroeder insists, “I do not want American conditions in the labor market….It has to be possible for people to live in decency and dignity without having to do three jobs a day and without any protection against dismissal.” But a look at the empirical evidence presents a very different picture.

In fact, Gersemann found that the vast majority of Americans who work more than one job choose to do so, and those who work two jobs are more often affluent and well-educated than squeaking by. Only 1.6 percent of Americans work more than one job because that have to.

Posted on 10/08/04 11:13 AM by Mary Katherine Ham

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