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I'm sitting here on a short trip to Munich, and just read Greg Mankiw's latest post regarding today's New York Times article by Paul Krugman regarding European Social Democracy and the pending US healthcare reform. Paul Krugman essentially argues that economic advance can come hand-in-hand with social democracy. From what I can tell, Mankiw is politely dissenting.
While it is indeed interesting [and perhaps somewhat telling] that the GDP/capita is so much higher in the US than elsewhere, it is difficult to associate this to actual quality of life. While Germans may make less than us annually, they make about equal to us per hour (see my napkin math below).
I suppose the question really becomes whether Europeans work less because the incentive structure is setup such that more work isn't worth it past a certain level (much like any gradated tax rate does), or if they actually value their time not working higher than the extra salary.
But it could also be because of this: GDP/Capita accounts for both employed and unemployed people in the country. While this is important overall, it is not as vital to an individual worker. What an individual worker cares most about is how much he is making in an hour for himself.
| |
GDP/Capita (PPP) |
Avg. Hours Worked (Annual) |
Average GDP/Hour (Productivity) |
Disposable Salary |
PPP Ratio |
Disposable Salary (PPP) |
Avg Disposable Salary/Hour (Real productivity?) |
|
US |
47440 |
1777 |
26.7 |
31410 |
1 |
31410 |
17.7 |
|
UK |
36358 |
1652 |
22.0 |
26312 |
1.09 |
28680 |
17.4 |
|
Germany |
35539 |
1362 |
26.1 |
25146 |
1.29 |
32438 |
23.8 |
|
France |
34205 |
1346 |
25.4 |
26416 |
1.35 |
35662 |
26.5 |
One notable and surprising ratio shown in this is the productivity of actual employed workers (the ones that calculate using "disposable salary"). These numbers should mitigate the influence of unemployed on the productivity numbers by taking disposable salary of employed workers and applying the PPP ratios, then finding productivity using that. When these figures are used, employed individuals in both Germany and France take home more per hour than their US and UK counterparts. Also, the disposable salary of Germans and French are marginally higher than their employed American counterparts after PPP is accounted for.
Sources:
GDP/Capita (PPP): http://gregmankiw.blogspot.com/2010/01/learning-from-europe.html
Average Hours Worked: OECD - http://en.wikipedia.org/wiki/Working_time
Disposable Salary: http://www.worldsalaries.org/
PPP: OECD - http://www.oecd.org/dataoecd/48/18/18598721.pdf