NCPA - National Center for Policy Analysis


September 13, 2004

American citizens have significantly higher incomes than Europeans, measured by gross domestic product (GDP) per person. Some say this reflects America's superior capitalist system. The Economist, however, argues that this simply reflects Europe's greater preference for leisure.

  • Over the past 50 years, both Europe and America had productivity gains, but America's working hours rose, while Europe's fell.
  • In the euro area today, fewer people work and those who do hold a job work shorter average hours.
  • By one estimate, the average American worker clocks up 40 percent more hours during his lifetime than the average worker in Germany, France or Italy.

It is this difference in worker hours that explains the differences between American and European incomes, says the Economist. For example:

  • Between 1970 and 2000, America's GDP per hour worked rose by 38 percent and average hours worked per person rose by 26 percent.
  • As a result American GDP per person increased by 64 percent.

With lower birth and immigration rates and an ageing population, Europe's labor force will soon start to shrink as a share of the population. That will make it harder for European governments to pay pension bills. Without faster growth, Europe will be unable to afford its welfare system, says the Economist.

If Europeans do not want to slip further down the rankings of GDP per person in future, then they will need to work longer hours during their lifetimes. Alternatively, they may continue to attach more value to leisure and the quality of life, rather than hard cash, says the Economist.

Source: "Mirror, mirror on the wall -- Europe v America," Economist, June 19, 2004.


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