Europe's unemployment rate, at 8.5 percent, is almost twice that of the United States. The European gross domestic product per capita at $29,400, versus $43,500 in the United States. In fact, the chief economist at one of Europe's leading governmental institutions has said, "At current trends, with demographics the way they are, the average U.S. citizen will be twice as rich as a Frenchman or a German in 20 years."
One reason Europeans have fewer jobs and are less wealthy than U.S. citizens is the burden of all the social welfare programs. A recent Wall Street Journal article on the Swedish disability program noted that Swedes are the healthiest people in the world – and yet the country has the world's highest rate of disability.
The problem is so widespread that the same article reported: "In Europe, roughly 20 percent of the working-age population – or 60 million people -- depend on various government benefits... compared to 13 percent in the United States."
The experience of Europe tells us mandated programs result in fewer jobs, declining families and eroding work ethics. The free market approach may not satisfy politicians' need to say they solved a problem. Rather, it works quietly, over time, creating multiple solutions, with some working better than others. Over time, the bad ones are rejected and the good ones are free to further evolve.
I think this article reaches the right conclusions, but the evidence is not as solid as the author might think. For starters, the U.S. and all of Europe is a little bit apples and a bushel of oranges. She also leads us to believe a paid family leave program in New Jersey will be the straw the breaks the camel. I agree the proposed program would lead NJ down the wrong path, but it is just one step—not the giant leap presented here.
I also reject her definition of work ethic. Work ethic stems from an inherent desire and satisfaction gained from working. What social programs erode is incentive based on the return to work. I would distinguish between the two. But relative to Europe, the U.S. has an abundance of both.
(HT: Cafe Hayek)
2 comments:
I think comparisons between countries are problematic in failing to recognize that countries, as sovereign nations, are entitled to have differing policy objectives, based on different values.
For example, in the US hard-work is generally seen as a core value. In other nations, relaxation or leisure is the trump card. It may not be useful to compare the productivity outcomes of these different places. If you use GDP per hour worked, France comes out on top. But in France, workers are either on strike, enjoying their leisure time, or working one of their maximum 35 hours per week. Is that the sort of place I want to live. Well, yes actually.
Using an example I am more familiar with, the average income in NZ has fallen relative to other nations over the past 20 years. Does this reveal a problem with our welfare system, which is generous compared to the US? Perhaps. Or, perhaps it reveals our willingness to sacrifice higher income so that everyone in the country can have a better life.
Oh BJG, my friend, your diagnosis is spot on, but your cure is exactly wrong.
There are large differences in preferences over leisure between countries, just as there are large differences WITHIN countries. But the income-leisure trade-off is an individual decision, not a collective decision. Why does it make sense for the state to tell an individual how much they should value leisure. Without exception, individuals in a free society will consume THEIR OWN optimal income-leisure bundle. Choice is a beautiful thing.
Of course France has higher GDP per hour of labor. That is exactly the outcome you would expect if you removed the bottom of the distribution of workers from the labor force, limited the number of hours a worker can work, and decreased the financial incentive to work. This evidence actually supports the conclusion that welfare states have distorted the income-leisure trade off.
Unemployment measures the percentage of people actively seeking work. Go ahead and ask the 10% of Europeans looking for jobs how much they are enjoying their “leisure”.
You conclude that the welfare state makes everyone better off in terms of their income-leisure consumption. But take a look at after-tax incomes. Removing the financial incentive to work means that people have to work MORE to achieve the same level of income. Distorting the labor market like this FORCES people, given their preference, to consume less income AND less leisure. Even if you were able to perfectly redistribute tax revenue (which you can’t) EVERYONE is made worse off.
The problem with the welfare state is the fact that it is so deceptively appealling. If we want everyone to be better off, why can’t we just give them what we think they want??? In reality, the welfare state ends up achieving the exact opposite of what was intended.
Post a Comment