Financial Times FT.com

More work and less play is the best policy for Europe

By Wolfgang Munchau

Published: August 27 2006 19:27 | Last updated: August 27 2006 19:27

The recent downward revision of historical US productivity data has interesting implications for Europeans, since they use US benchmarks to define their own reform agenda. By 1995, the Europeans had almost closed the productivity gap with the US. But the gap has widened since. It now appears that this gap is a little smaller than we thought. As an explanation of why Europeans are on average so much poorer than Americans, productivity is a partial answer at best.

Per capita gross domestic product can be split into three factors: productivity, working hours per employee and the employment rate. If the former is not the main cause behind the US/European Union income gap, it must be the latter two. The EU has a lower employment rate than the US and those with a job tend to work fewer hours. The interesting question is: why should that be so?

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