THE PRODUCTIVITY GAP
August 11, 2004
Europeans are frustrated. They have been behind the United States economically for years and thought this was due to lack of economic integration. So they created the European Union, with a common currency and virtually free mobility of goods, capital and labor throughout the continent. Yet Europe continues to lag, says Bruce Bartlett.
According to a new report from the Bureau of Labor Statistics:
- The United States had a real gross domestic product per person in 2003 of $34,960 (in 1999 dollars); this is well above every European country.
- The most productive European country, Norway, has a per capita GDP of just $30,882 (converted using purchasing power parity exchange rates).
- The major countries of Europe are even further behind: the United Kingdom ($26,039), France ($25,578), Italy ($24,894) and Germany ($24,813).
In other words, Europeans produce no more per year than Americans did 20 years ago. And they are not catching up. According to the Bank for International Settlements in Switzerland, the productivity gap between the United States and Europe is actually widening. In the Euro area as a whole, workers were 86 percent as productive as American workers in 1995. In 2003, this fell to 84 percent.
As a consequence, living standards are much lower in Europe than most Americans imagine, says Bartlett. This fact is highlighted in a new study by the Swedish think tank Timbro. For example:
- It notes that the average poor family here has 25 percent more living space than the average European.
- Looking at all American households, we have about twice as much space: 1,875 square feet here versus 976.5 square feet in Europe.
On average, Europeans only live about as well as those in the poorest American state, Mississippi.
Source: Bruce Bartlett, "The Productivity Gap," National Center for Policy Analysis, August 11, 2004.
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