Jeff Rouse wrote:
"I'd like to add one of the "big questions" that I think about from time
to time.
to time.
One arguement against welfare programs in the US is that with lower
taxes and more incentinve to work and invest, over time, even people in
the bottom 20% of the income distribution will eventually be better off
than middle income Europeans who have less incentinve to act in ways
consistent with economic growth. Now after 50 years of relatively generous
welfare programs in Europe compared to the US, I do not see the US
quickly outpacing the Europeans. Yes, we have higher incomes, but also
longer work weeks. As I recall from the last set of numbers I saw, US
productivity per hour is not THAT different than in Europe (I am thinking of
France and Germany in particular). What am I missing?"
taxes and more incentinve to work and invest, over time, even people in
the bottom 20% of the income distribution will eventually be better off
than middle income Europeans who have less incentinve to act in ways
consistent with economic growth. Now after 50 years of relatively generous
welfare programs in Europe compared to the US, I do not see the US
quickly outpacing the Europeans. Yes, we have higher incomes, but also
longer work weeks. As I recall from the last set of numbers I saw, US
productivity per hour is not THAT different than in Europe (I am thinking of
France and Germany in particular). What am I missing?"
By one measure, there is a big difference, in per capita GDP taking into account purchasing power parity. From the OECD site, in 1999 the U.S. had a per capita GDP of $33,836. Germany, France, UK, Italy were all between $22,000 and $24,000.
For things to be about the same, it seems like the Europeans would have to put a big value of leisure time. Is that something that can be measured?
I don't know much about purchasing power parity, so this may not be the right comparison. Also, maybe the differences I show have not changed much over 50 years. I don't know what they used to be. But I have read that Germany has been trying to scale back its welfare programs a little to get more foreign investment.
Cyril Morong
