Friday, October 05, 2007

Europe-bashing- Krugman Sez It's Unjustifed

It is a distinct pleasure to be able to link to Paul Krugman again, and he's got one whale of a post on his blog talking about European productivity.

Specifically, he's talking about France. France tends to get bashed a lot in the American press and among American conservatives for being an economic basket case. Yes, France has its problems, but then again:

[A] visit to France – and/or a look at the statistics – makes it clear that the French economy gets a bum rap. I don’t want to go overboard here: France has a lot of problems. But it’s doing much better than the American caricature would have it.

French productivity – output per hour – is about the same as ours. What’s more, even during the period 1995-2005 – the years when we Americans were boasting about our productivity boom – French productivity grew only half a point slower than US productivity. And the US productivity boom now seems to be over.

Also, tales of mass unemployment are greatly exaggerated. French residents in their prime working years, ages 25-54, are as likely to be employed as their American counterparts (the employment-population ratio is 80 percent for both).

Now, it’s true that French GDP per capita is lower than ours. That reflects three things: the French work shorter hours; French people under 25 are less likely to be employed than young Americans, and the French are much more likely than Americans to retire early.

Short working hours are a choice – and it’s at least arguable that the French have made a better choice than America, the no-vacation nation.

Low employment among the young is a complicated story. To some extent it may represent lack of job openings. But a lot of it is the result of good things: young French are more likely to stay in school than young Americans, and fewer French students are forced by financial necessity to work while studying.

Finally, the French retire early. That’s a real problem: their pension system creates perverse incentives. We, of course, have this superb program called Social Security, which does a much better job.

So yes, France has problems. But what supersized CEO paychecks – or Hillary Clinton - have to do with avoiding France’s mistakes on pension policy is a mystery to me.

Still, what about the future? Aren’t we surging ahead in information technology?

Um, no. In fact, the US is being left behind in the broadband revolution.

I knew about French productivity being pretty much in-line with American productivity, and I agree with a lot of what he's saying here. One thing that I would note that he didn't, however, is that American productivity statistics are a bit misleading, as a lot of America's most productive salaried workers are working much longer hours than they used to. I'm not sure whether or not these are accurately reflected in American per-hour productivity statistics, as there's really not that much incentive to do so when there's no such beast as overtime pay and even the employees themselves often aren't quite sure of how late they're working.

Plus, there's something to be said for shorter hours in terms of productivity in the first place. The longer someone works (or, even worse, is expected to work), the likelier it is that their productivity is going to crater. They're either going to get distracted, goof off a little to relieve the stress, or simply burn out and necessitate either a vacation or an expensive, unproductive search for a replacement. The best example of this is Japan during the height of its "live for the Corporation" years: the workers worked long hours, but were often very, very unproductive during that time.

The French's shorter hours would be conducive to greater productivity while they actually are working, and a greater quality of life while they're not. Honestly, aside from a slight hit to GDP--that, in America, principally consists of increased compensation to the already fantastically wealthy and slightly greater pay for those with no time to enjoy it--I honestly fail to see the problem.

No comments:

Post a Comment