Europe doesn't work well, not as much

Europeans earn less than Americans, by a large and growing margin. But they also work less. Substantially less. Shocking less, according to a study by Alberto Alesina, a professor of economics at Harvard.  The good professor has determined that

the average number of hours worked per person aged 15 to 25 each year in France and Germany is about 50 percent lower than in the United States.

Of course, this 50% figure somewhat overstates the overall labor force comparison, since young people in France and Germany face daunting rates of unemployment, as employers there are most reluctant to add new workers (young folks, mostly) when they know that they can't easily be laid—off, and when every new worker will cost them a huge burden in social welfare taxes and other involuntary expenditure, over and above the hourly wage. Still, losing half of the labor of the most energetic, innovative, and forward—looking segment of the labor force is not a particularly enlightened practice.

Until the early 1970s, Europeans and Americans worked roughly the same number of hours in a year. But following the oil crisis, labor practices diverged sharply. Americans kept on working roughly the same number of hours per year, rising slightly in the most recent decade, while European working hours declined steadily.

Some Americans are familiar with French and German regulations limiting the work week to 35 hours or less, but Professor Alesina says that most of the decline is related to lower rates of labor force participation and higher numbers of vacation days, rather than differences int he normal work week.

Coincident with this decline in European yearly work hours has been a steady rise in overall taxation of income there. In other words, as take—home pay has declined due to higher taxation, European workers have made the rational choice to work less, and take more of their compensation in the form of untaxed leisure. Moreover, extensive benefits, such as health care coverage and unemployment allowances, have made the decision to forego a paycheck less painful than it otherwise would be.

Correspondingly, European employers have seen their hourly wage burden rise significantly, despite overall worker incomes being lower than in the United States. They, too, are responding rationally.

Now that the EU has expanded into much lower cost and lower tax countries of Eastern Europe, new manufacturing facilities are beginning to migrate there out of old Europe. One of the latest is a factory which will produce the Opel Zafira, GM Europe's entry in the family car market. Instead of expanding Opel's main plant at Russelsheim, near Frankfurt, GM will add to its factory in Gliwice, Poland, augmenting existing production of the Zafira at its Bochum, Germany plant.

German workers were offered the opportunity to bid for the new work, but GM evidently found their offer less than enticing. The unions are claiming that a recent deal between Lockheed Martin and Poland, selling fighter jets to Poland, in return for an American commitment to increase manufacturing investment in Poland, makes the decision political, rather than economic. GM confirms that the political aspect came into play, in addition to economic factors.

But it is rather hard to believe that GM would willingly incur a meaningful economic penalty to help out another corporation. Rather, it seems sensible to consider the political aspect a bonus in the eyes of GM. More likely than not, GM is also happy to demonstrate to its German workforce that they have genuine competition just across their eastern border, so that past labor practices may not serve German workers well in the future. GM's biggest stake is in enhancing overall productivity of its large German workforce.

The underlying point of all of this is not that Europeans are lazy, but rather that mistaken government policies, especially welfare state policies and the recent deliberate snubs to the United States on foreign policy and defense issues, do bring with them a considerable cost.

Let's hope that the Europeans are listening. Otherwise, they will only continue to fall further behind the United States and the dynamic economies of East Asia, both of which continue to value progress and accumulation of wealth over pining for the good old days.

Europeans earn less than Americans, by a large and growing margin. But they also work less. Substantially less. Shocking less, according to a study by Alberto Alesina, a professor of economics at Harvard.  The good professor has determined that

the average number of hours worked per person aged 15 to 25 each year in France and Germany is about 50 percent lower than in the United States.

Of course, this 50% figure somewhat overstates the overall labor force comparison, since young people in France and Germany face daunting rates of unemployment, as employers there are most reluctant to add new workers (young folks, mostly) when they know that they can't easily be laid—off, and when every new worker will cost them a huge burden in social welfare taxes and other involuntary expenditure, over and above the hourly wage. Still, losing half of the labor of the most energetic, innovative, and forward—looking segment of the labor force is not a particularly enlightened practice.

Until the early 1970s, Europeans and Americans worked roughly the same number of hours in a year. But following the oil crisis, labor practices diverged sharply. Americans kept on working roughly the same number of hours per year, rising slightly in the most recent decade, while European working hours declined steadily.

Some Americans are familiar with French and German regulations limiting the work week to 35 hours or less, but Professor Alesina says that most of the decline is related to lower rates of labor force participation and higher numbers of vacation days, rather than differences int he normal work week.

Coincident with this decline in European yearly work hours has been a steady rise in overall taxation of income there. In other words, as take—home pay has declined due to higher taxation, European workers have made the rational choice to work less, and take more of their compensation in the form of untaxed leisure. Moreover, extensive benefits, such as health care coverage and unemployment allowances, have made the decision to forego a paycheck less painful than it otherwise would be.

Correspondingly, European employers have seen their hourly wage burden rise significantly, despite overall worker incomes being lower than in the United States. They, too, are responding rationally.

Now that the EU has expanded into much lower cost and lower tax countries of Eastern Europe, new manufacturing facilities are beginning to migrate there out of old Europe. One of the latest is a factory which will produce the Opel Zafira, GM Europe's entry in the family car market. Instead of expanding Opel's main plant at Russelsheim, near Frankfurt, GM will add to its factory in Gliwice, Poland, augmenting existing production of the Zafira at its Bochum, Germany plant.

German workers were offered the opportunity to bid for the new work, but GM evidently found their offer less than enticing. The unions are claiming that a recent deal between Lockheed Martin and Poland, selling fighter jets to Poland, in return for an American commitment to increase manufacturing investment in Poland, makes the decision political, rather than economic. GM confirms that the political aspect came into play, in addition to economic factors.

But it is rather hard to believe that GM would willingly incur a meaningful economic penalty to help out another corporation. Rather, it seems sensible to consider the political aspect a bonus in the eyes of GM. More likely than not, GM is also happy to demonstrate to its German workforce that they have genuine competition just across their eastern border, so that past labor practices may not serve German workers well in the future. GM's biggest stake is in enhancing overall productivity of its large German workforce.

The underlying point of all of this is not that Europeans are lazy, but rather that mistaken government policies, especially welfare state policies and the recent deliberate snubs to the United States on foreign policy and defense issues, do bring with them a considerable cost.

Let's hope that the Europeans are listening. Otherwise, they will only continue to fall further behind the United States and the dynamic economies of East Asia, both of which continue to value progress and accumulation of wealth over pining for the good old days.