European Malaise

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European Malaise

In 2006, the last year for which we have complete results, the U.S. unemployment rate stood at 4.7 percent, while in Europe it was 8 percent. And since 1970, the U.S. has created 57 million jobs, while all of Europe has added just 4 million jobs.

According to the Organisation for Economic Co-operation and Development (the OECD), the economies of the European Union grew by an average of 2.7 percent in 2006. The worst economic performance was by France, whose economy grew at just 2.1 percent. Meanwhile, the U.S. economy grew by 3.3 percent. In fact, during the past decade, the U.S. economy has grown at twice the real average rate of the economies of the European countries.1

Europeans are well-educated and have access to world-class technology; so, why do they persistently lag behind the U.S.? The most obvious factor is that Europe is burdened with a massive welfare system. According to Heritage Foundation research fellow Dr. Daniel Mitchell, U.S. federal, state, and local spending totals less than 36 percent of GDP. Yet, despite their miniscule military budgets, the ratio in France and Sweden is 50 percent, and in Germany it is 45 percent.2

And as human nature would predict, social programs that reward people for not working succeed only in keeping them on the welfare rolls and out of the workforce. At the same time, those Europeans who do hold jobs are motivated to spend far less time than Americans in the workplace.

For example, France is famous for its low-intensity approach to work. French workers are required by law to take at least five weeks of vacation time, and many take eight weeks off. They also enjoy 12 paid holidays, and a 35-hour work-week; compared to a regular 40-hour week, that’s the equivalent of another 22 days off per year.

This explains why France, even though it has one of the five largest economies in the world, dramatically trails the U.S. in economic growth: On average, French employees spend 300 fewer hours per year on the job than American workers.

Moreover, according to the Conference Board, output per hour in the European Union is only 91 percent of U.S. output per hour, and the gap is growing. Between 1995 and 2005, U.S. productivity per hour increased 1 percent per year faster than in the EU. As a result, GDP per EU worker is down to just 73 percent of GDP per American worker.

Unionized French workers in the rail, gas, and electric industries receive generous early retirement benefits that threaten to bankrupt the system. The pension benefits for 1.1 million retired workers have created a $10 billion deficit...

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