> but how do they account for the fact that high minimum wage and good social safety nets in Western Europe results in lower participation in the workforce from people with lower economic productivity?
Before you ask "why", ask "if". Lots of European countries, including the UK, Germany, France, and the Netherlands have a higher workforce particpation rate than the US.
> What really had my brain going is why is this not the case in the Western Europe?
Can you explain? Western Europe by and large suffers from the same problem. According to Brookings (https://www.brookings.edu/wp-content/uploads/2017/05/ccf_201...), while the US has a faster rate of male labor de-participation, the UK, Canada, and France are experiencing similar issues (Figure 2). No idea about the cause though.
> In continental Europe, nobody expects it to work like that. ... To someone who grew up in that culture, your wild-west thinking seems a bit, well, primitive? Or uncivilized?
One should challenge that setup by asking the question: has contintental Europe's policies resulted in high wages?
France has far lower wages than the US, with 1/4 to 1/5 the wage growth rate of the US over the last two decades. Germany, Britain, Spain, Portugal, Greece, Italy, Austria, Belgium, all have considerably lower wages than the US.
Continental Europe also includes dozens of nations that are dramatically poorer than the US, both in terms of median income and median household net worth.
Wouldn't it be more primitive or uncivilized to be using the French approach, since it has resulted in dramatically lower wage growth for decades now? Wage growth in France averaged 0.5% annually the prior two decades. In the US, 2.5% wage growth is considered very slow, with 3.5% to 4% being average in the 1999-2009 time frame. If their system works so well, where's the wage growth (and we're talking about the last 20 years, not a blip of time)?
>Where you got that number? UK has higher GDP per capita than France and it's lower than Germany but not by 30%.
because you're not looking at output per hour worked. The Brits work about ~1670 hours per year. The French about ~1470, and the Germans ~1360. If you look at the output per hour, The UK comes in below Euro average, roughly on a level with Italy and Spain.
> They are, but do not forget that in Europe, our take-home wages already have healthcare, social security and pension contributions taken care of, and our housing and general cost of living (e.g. groceries) are also vastly lower than in the US.
Well, Europe is big. Cost of living differ between different places.
You can look at measures like 'disposable income' or similar metrics.
Doesn't really matter too much what specific metric you use, US incomes are higher.
Thanks for the source you linked to. To quote them:
> Changing the price deflator used to adjust wages for inflation can boost measured wage growth. But wage growth would still lag far behind growth in economywide productivity, [...]
They are either using difference inflation metrics for productivity vs wages, or their definition of 'far' is different from mine.
Since 1950, the amount of compensation going to labour has fluctuated around 59% - 65% of total GDP in the US. A fairly narrow range; and no reason to say anything like 'lag[ging] far behind'.
Because we are looking at a ratio, it doesn't matter how or even whether we adjust for inflation here.
So all productivity improvements that make it into GDP also make it proportionally into wages. You can't really ask for more, can you?
Whether wages have stagnated is then a question of whether real GDP has stagnated. And, alas, unions aren't really known for driving productivity in the US. Just the opposite.
Of course, you can argue about median vs average. And that's a very valid discussion to have.
> Many workers are much better off in the US than in Europe as well
Workers are not better off, there are way worse off in the US. They get less money due to the minimum wage being very low and the cost of medical care, they work more in average, they have less holidays and less social mobility than in Europe.
Big businesses however are better off so I agree in part with your first paragraph.
> The effect of this is visible, e.g. when you look at efficiency of e.g. german workers compared to their US counterparts.
Can you please then explain to me how ~ 332mm people in the US are more productive than ~448mm people in the EU by almost 5 trillion dollars if the Americans are less efficient?
> But I do think think that countries which offer a great deal of socialized benefits (such as Finland, Norway, Sweden etc.) have a significant problem with a unemployment in the youngest generation of the labor force.
the state takes a pretty big amount of risk and costs. Who pays healthcare, who pays maternity leave and social security in a fast and loose labor market like that? The answer in the US often is, nobody or the federal government.
In a country like Germany, France or in Scandinavia running a business is harder because there's an expectation that businesses can take care of their workers. A lot of red tape exists to make sure that a business can shoulder these things. In fact in Scandinavia eliminating unproductive firms through measures like wage compression was deliberately part of their social model to drive concentration and creation of productive firms.
There really are a lot of implications to creating the sort of environment that the US or to a lesser extent the UK has, and it doesn't work well with the economic model of most of Europe.
Germany is somewhat on the low side in terms of work hours[1]. Their economic gains are from a rather complicated history.
I don't mean to insult Germany - I think their ranking here is actually a good thing. I'm glad they have found a way to keep work from taking over their lives.
> the only country in Europe who are capable of sustaining themselves.
That would be because of the insane class-specific "put option" we call the Euro that was really a disguised bank bailout. German economic policy (be a competitive net-exporter) isn't possible is everyone tries to do it. For a much better explanation why Europe is screwed economically, see Mark Blyth's (prof. econ. at Brown) talks[2] on the subject, which is much better than my rushed explanation.
> Switzerland and Luxembourg are way WAY richer per capita than the US, and have much robust employee rights.
When you say per capita, are you referring to median or mean figures?
Hong Kong is richer per capita than Switzerland at the median and does not have nearly as robust of employee rights.
The US is richer at the median than Germany and does not have nearly the worker protections. The US also has vastly more low skill labor immigration (for 40+ years now), which persistently debases its median figures. Why are German workers so relatively poor, if the claims about worker rights is accurate? Surely the dynamo of Europe, the German economy, combined with such potent worker protections, should lead to enormous median wealth.
Luxembourg has 613,000 people. That's a pretty ridiculous comparison. You're comparing a giant country of 330 million to a modest size city like San Francisco.
> But I do think think that countries which offer a great deal of socialized benefits (such as Finland, Norway, Sweden etc.) have a significant problem with a unemployment in the youngest generation of the labor force.
My guess would be that it is catching up, but still much lower.
However, productivity per hour (in US dollars) is still much higher in the UK than e.g. Australia, the EU-28, the OECD or Canada. I'm not sure why this study took 2010 as a baseline though, it seems to be a bias towards how well countries copied with the financial crisis.
> Given that EU wages have increased much more than US wages we can conclude that unemployment has very little to do with wage increases.
No, we cannot. Unemployment and wage increases could be perfectly positively correlated and still be completely consistent with EU wages rising faster in the US when the EU unemployment rate is twice the US rate.
All we can conclude is that the EU unemployment rate to wage increase function is not the same as the US function, so that a given level of unemployment does not result in the same rate of wage increases in the EU and the US.
There are huge social safety net differences between the EU and the US that might affect how urgent it is for an unemployed person to find a job, and so could affect what employers have to offer to get workers.
In the US, being out of work is a major disaster for many people. If you are in a state that has not expanded Medicaid, you may not be able to afford even the cheapest health insurance for more than a short time with no money coming in if, like many Americans, you do not have much in savings.
> Compared to the US, Western Europe is paradise on earth for employees.
No, it isn't. For example,
> 80% of the French earn less than €3k a month (equivalent to $36k a year) and 50% less than €2k a month ($24k a year). This is BEFORE taxes on income.
> I think that overall in Europe, there is a much less steep income curve as you advance your career, skills, or education. This is good for the majority of people, but bad for your typical HN'er.
I don't understand; how is this good for the majority of people?
Before you ask "why", ask "if". Lots of European countries, including the UK, Germany, France, and the Netherlands have a higher workforce particpation rate than the US.
https://data.oecd.org/emp/labour-force-participation-rate.ht...
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