The Wall Street Journal has made a remarkable discovery.
He who does not work (much) does not eat (much). Europe, says the Journal, is descending into poverty because Europeans are, um, lazy.
Based on International Monetary Fund (IMF) figures, in 2008 the Eurozone and U.S. economies were roughly the same size with U.S. GDP at $14.8 trillion and Europe at $14.2 trillion (current dollars.)
Since then, the Eurozone has barely grown, up a mere 8% to $15 trillion, compared to the United States, which grew 82% and is pushing toward GDP of $27 trillion.
Top this off with inflation running 10%, Europeans are cutting back on everything from meat in Germany to olive oil in Spain.
One European think tank says that if the trend continues, by 2035 the gap between economic output per capita in the U.S. and the European Union will be as big as today’s spread between Japan and Ecuador.
High taxes are surely part of the problem. European nations grab some 40-45% of GDP in taxes each year, compared to 27% in the United States, counting state and local levies.
Worse yet, the money mostly goes to lavish social programs that reduce Europeans’ need to work. Unsurprisingly, they work much less than Americans, about 400 hours or 10 weeks fewer, annually.
The Journal notes that in Germany’s health care sector almost half of all employees work less than 30 hours a week. Ask any American nurse about her job, and within five minutes she’ll be talking about how much overtime she can get.
Meanwhile, the current South Korean government, distressed by the consequences of a 2018 law limiting the work week to 52 hours, wants to raise the limit to 69 hours a week. That’ll buy a lot of kimchee.
A solution that does not seem to occur to continentals is to work harder. The “pauperization” of Europe is recruiting more workers in Europe’s trade unions, reversing a decades’ long decline. The union goal? Not higher wages but even less work.
Germany’s biggest trade union is pushing for a four-day work week at current pay rather than more take home for employees.
Rather worryingly, the union argues that working even less is the way to recruit younger workers otherwise disinclined to show up. Talkin’ bout my geh, geh, generation.
Huw Pill, (just make your own puns, thank you) the Bank of England’s chief economist, says, basically, live with it and stop pushing for higher wages.
“Yes, we’re all worse off,” but to try for higher pay, he says, would only fuel more inflation.
Anyway, now we know. Working our rear-ends off didn’t go for naught.
Maybe we should do more of it.
Twenty years ago, 66.5% of Americans were in the work force, employed or looking for a job. Today, it’s just 62.6%. That is mostly because U.S. men are goofing off and U.S. women are letting them.
In 2000, almost 72% of American males were in the work force. Today, it’s just 66.5%, a drop of 5.4 points. For women, those figures are 60.1% vs 57.3%, a drop of only 2.8 points.
It should be a major objective of U.S. policy to get more Americans working harder, for social as well as economic reasons. Men at ease make most of the world’s mischief.
We’ve herein advocated abolishing the Social Security and Medicare taxes, a 15% penalty on work. Here are two more notions.
Franklin Roosevelt decided time-and-a-half was the right rate on overtime the same way he set the price of gold—by whim. We have no idea whether hourly workers would prefer more overtime at time-and-a-quarter, or less overtime at time-and-three-fourths. We do know low-income workers want to work more hours.
For a five-year experiment, leave it up to the states. Let them impose anything from time-and-a-quarter to time-and-three-quarters and observe the impact on worker income. Our guess is that time-and-a-quarter would raise average take home significantly, but let’s see.
The other notion is to abolish entirely the corporate income tax, which delivered just 8.7% of federal tax revenues in 2022.
A measure of this unproductive tax’s destructiveness is the 43% revenues rise from 2017 to 2022 in the wake of Trump cutting the maximum rate from 35% to 21%. Supply-side effects rise as a measure of a tax’s negative impact on enterprise.
And it was starting in 2018 that U.S. unemployment began its first sustained period below 4% in half a century.
Were the corporate tax not so destructive, the Europeans, whose answer to poverty is imposed idleness, would not be demanding we agree to a global corporate minimum tax.
The Euros say they want to avoid a “race to the bottom.”
They mean they want to stop us racing to the top.
Which is where Americans belong.
P.S. You’ve got to come to COSM 2023 coming up Nov.1-3 in Bellevue, Washington. COSM 2022 and 2021 were probably the best tech gatherings we’ve ever been to and 2023 will do it again.
COSM is the ultimate expression of George’s worldview, the Gilder Team’s insights into what is happening in tech, how it matters to the world and especially to our readers and tech investors. Nov. 1-3:
The focus this year is on AI and all its works.
Plus you will meet lots of key folks from the companies we cover.
Speaking of heroes, the brilliant and brave Michael Shellenberger (recently harassed by Congress People of Limited IQ) will speak on Free Speech in the Digital Age.
As always Carver Mead will give a riveting reflection on our three days together.
Social time is great—meet old friends and fellow subscribers and investors.
George and Nini of course and the rest of the Gilder team, John, Steve, and Richard will be there too.,
DON’T MISS IT.
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P.P.S. Come join our Eagle colleagues on an incredible cruise! We set sail on Dec. 4 for 16 days, embarking on a memorable journey that combines fascinating history, vibrant culture and picturesque scenery. Enjoy seminars on the days we are cruising from one destination to another, as well as dinners with members of the Eagle team. Just some of the places we’ll visit are Mexico, Belize, Panama, Ecuador and more! Click here now for all the details.