When we make comparisons between countries using per-capita GDP, we must always take a closer look. The simple numbers don’t say what you think. For example, per capita GDP in France is only approximately 78-80% of per capita GDP in the U.S. The temptation is to quickly assume that the U.S. is a more developed or richer country, or that the U.S. enjoys a higher standard of living. But that’s not what’s happening. Paul Krugman has an excellent and well written analysis so I’ll let him say it:
one comment that often arises here is that Europe must be doing something wrong, because it has much lower GDP per capita. And it’s true: French GDP per capita, adjusted for purchasing power, is only about 3/4 the US level.But when you look behind that number, the story isn’t quite what you might think.
David Leonhardt recently pointed to a useful summary (pdf) produced by the BLS, which lets us break apart the factors between the GDP gap. I’m going to do this for France, not Europe more broadly, because that’s what the BLS gives us; but anyway, France is the country we have strong feelings about, right?
One more thing: I’m going to use 2008, not 2009. In 2009 US firms laid off lots of workers, while European firms didn’t; that produces a divergence in productivity that has more to do with short-run business cycle events than with fundamental trends. You can go back to the data source and roll your own for 2009, if you like, but I think this gives a better sense of the underlying differences.
So, here are some ratios of France to the United States:
GDP per capita: 0.731
GDP per hour worked: 0.988
Employment as a share of population: 0.837
Hours per worker: 0.884
So French workers are roughly as productive as US workers. But fewer Frenchmen and women are working, and when they work, they work fewer hours.
Why are fewer Frenchmen working? As I’ve pointed out, during prime working years they’re as likely to work as Americans. But fewer young people work (in part because of more generous college aid); and, mainly, the French retire earlier. The latter is arguably the result of misguided policies: Mitterand made early retirement alarmingly attractive. But it’s not a problem of weak productivity or mass unemployment.
And why do the French work shorter hours? Probably for the most part because of government policies mandating vacation time.
The bottom line is that France is a society with the same level of technology and productivity as the US, but one that has made different choices about retirement and leisure. Vive la difference!