A segment on Marketplace radio this morning reported that the European Union (EU) has the same standard of living that the United States had 25 years ago. The piece was generous enough to note that much of the gap is due to the fact that the EU just admitted 10 countries from Eastern Europe that were mostly much poorer, thereby bringing down the average. However, it also reports that poductivity in the former EU 15 is far lower than the United States. Well, data from the OECD does not support that assessment. Average productivity in the EU15 is somewhat lower, but the gaps are mostly not very large. For example, the OECD estimates productivity for Germany at 91 percent of the U.S. level (productivity in former West Germany would be almost the same as the U.S. level, since the East has much lower productivity). The UK, Italy, and Spain are put at 83 percent, 79 percent, and 76 percent of the U.S. level, respectively. On the other hand France and several smaller countries are estimated to have higher levels of productivity. The productivity levels for France, Belgium, and the Netherlands, are estimated at 101 percent, 109 percent, and 104 percent, respectively. How far behind does this put the EU 15? Well, eyeballing the data, let's put the average current productivity level at 88 percent of the U.S. level. That puts the EU productivity level at approximately the same place as the U.S. was in 2001. Those poor people. The EU 15 does have considerably lower GDP per person, which is largely a result of the fact they have chosen to take some of the benefits of productivity growth in the form of leisure (4-6 weeks a year of vacation are the norm, and 35 hour workweeks are common) instead of higher wages. There is no obvious reason that this is bad, and anyone who has heard about global warming may think that this is good. Europe emits much less greenhouse gas per capita than the U.S. and its decision to take much of the gains from productivity growth in leisure is undoubtedly an important reason.
--Dean Baker
