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US job growth vs. Canadian and EU job growth

By: Stew Mayers There are good reasons why the US creates jobs and the Canada-EU socialist axis does not
August 10 2005

There is barely a whimper in the Canadian media on the July ’05 jobs report – or more accurately, the no job creation report. Incredibly no jobs were created in Canada during July. If the same happened in the US, the media would be full of tales of US economic weakness and empire decline. The US is creating 190.000 jobs per month with its economy growing at 3.5-4.0 % per annum. Combined with productivity rates of 2.5 % per annum – double and in some years triple the Canadian average – the US will experience higher incomes, higher standards of living and more tax revenues as the economy expands, and these monies can be reinvested in health, education and infrastructure furthering US economic advantage.

This difference in job creationism is massive. In Canada in 2004 225.000 jobs were created and in 2005 the estimates are that about 130.000 new jobs will be generated. The trend to lower economic and job growth in Canada is self-evident. Indeed in Canada thus far in 2005, less than 8.000 jobs per month have been created. Such a job creation growth translated to the US would mean a US job creation rate of 80.000 per month or about 1 million per annum. In fact the US job creation level is 2.2 million per annum. The difference in US job creationism and its impact on society and employment levels cannot be downplayed.

The lack of real job creation in Canada and in Europe underscores the weakness of the big government society model. In both locales, there are fewer jobs produced on a per capita basis, than in the US and crucially both Canada and Europe have less full time and non-governmental job creation than the US. In Europe in the past 15 years according to the OECD, fully 90 % of jobs have been government based. In Canada it is 50 % with about ½ of the remainder in part-time positions. The exact opposite has occurred in the US where 90 % or more of jobs are full time and non-government based and indeed until recent months one of the biggest job losers in the US was the government sector [along with manufacturing and transportation].

The US has a labor force participation rate of 66 % trending to 70 %, which is higher than the European average of 60% and the Canadian average of 62%, both of which are trending lower. This large discrepancy in the % employed leads to burdensome taxation in both Canada and Europe as less people work fewer hours. The lack of labor force participation is exacerbated by declining birth rates in Canada and the EU which are lower than in the US and by less dynamic labor, industry and services sectors which militate against ease of labor and capital mobility. Big government ensures lower rates of employment, higher unemployment with EU levels double that of the US [10 vs. 5 %] and Canadian rates 2 % above US levels [7% vs. 5 %], and market rigidity leading to lower wages and lower living standards.

Not only are workforce rates lower in Canada and the EU but both Europeans and Canadians work significantly less hours than Americans at far lower productivity rates. In Canada the average worker productivity is at about 80 % of a US worker’s rate [see this article on the factors involved in lower Canadian productivity Productivity problems in Canada]. Though Canadians work more hours than Europeans they work 10 % less hours than Americans. With lower outputs and less hours Canadians are assured of being poorer than their US counterparts.

Similar gaps exist between Europe and the US. Alarmingly the number of hours worked in Europe is now 25 % below US levels [about 2100 hours per year in the US vs. 1600 in the EU], falling from parity in the 1970s [OECD data]. Around six weeks of paid time off is now the annual norm across Europe. This is 2 to 3 times as many paid days off per year than Americans. Vacation time has nearly doubled since the 1970s in Italy, Spain and the Netherlands. France recently extended its three-year law reducing the workweek to 35 hours from 39. The law now includes companies with fewer than 20 employees. The trend in Europe is towards 30-hour work weeks which would mean 1400 hours per year of work, or fully 33 % below US levels. Indeed in Canada and Europe workers not only work less but as well take off more ‘sick’ time further reducing the number of working hours.

In 2002 Timbro Institute of Sweden conducted a study found that the average European worker took more than 30 days of sick time per year. According to a New York Times report, on an average day in Norway, 25 percent of Norway’s workers call in sick. Shorter work-weeks in both Europe and Canada and increased ‘sick’ time, have done nothing to reduce higher unemployment. Both Europe and Canada have destroyed the fallacy of a fixed division of labor, which is a favorite of socialists and big government supporters. Supposedly under this inane idea, the quantity of society’s work is fixed and ergo by dividing this fixed amount of work by requiring less hours and more vacation or sick time from a population, the greater will be the number of workers, and hence the lower the unemployment rate. In fact the exact opposite occurs.

One reason why Europeans and Canadians work less than Americans is the punitive level of taxation. The US is certainly not a free market nirvana of low tax rates and unfettered trade. Far from it. The US economy is over-taxed, over-regulated and over-protected. In fact the U.S. has the highest per capita taxes of any developed country. But importantly the Americans also have lower marginal tax rates. This difference occurs because Americans work and consume more, and so have higher tax bases and therefore pay in total higher per capita taxes.

Why do Americans work more? Well living in the US is expensive with housing, education and health care costing small fortunes. So Americans must work more. The propensity to greater work and higher productivity in the US coincided however, with its marginal tax rates decreases. As the US lowered its marginal tax rates, the economy grew, and hours of work and wages per hour increased. The cycle of economic growth was stimulated by marginal tax and investment reductions, further enhanced by the $1.3 Trillion Bush tax cuts.

Similarly, Europe’s change to shorter hours coincides with its marginal tax increases. Three completely independent recent studies reach the same conclusions: The Federal Reserve of Minneapolis concludes that twenty years ago, Europeans worked just as long as hard as the rest of the developed world. The Federal Reserve’s report said that when European tax levels were comparable to those in the U.S., work hours were similar. As Europe’s taxes increased, workers responded by working less and those that do find jobs, find them in government. The only exception to Europe’s poor job and tax performance has of course been Ireland and the UK. Ireland currently has the lowest European marginal tax rate, even lower than the U.S and UK.

The recent Timbro study cited above concludes that marginal tax rates have a material impact on explaining the difference in economic performance. In approximately the last 30 years, taxes in the U.S (as well as in Ireland) have increased by 1.5 percent. In contrast, European country tax rates (except in Ireland) have increased much more - closer to 4 %. The sum of ruinous taxation is evinced in the low per capita GDP rates in Canada and Europe. Canada GDP per capita (at purchasing power parity) is $29,800 [2003 est. CIA Factbook] and the EU’s is $25,326, versus the US GDP per capita (at purchasing power parity) of $37,800. Even if Americans must buy health care and guns, they are far better off then they would be in Canada or the EU.

Importantly Americans produce private sector jobs, eschewing the big government-union alliance that impedes productivity growth in Canada and the EU. A recent OECD study concludes that practically all (97 percent) of all European civilian job creation has been in the government sector. Europe’s higher taxes fuel public sector growth, while its social welfare programs eliminate some of the penalties for not working. The OECD blames European’s unwillingness to work as the principal reason for lower output per worker and the resulting lower standard of living compared to Americans. According to OECD, “Research has clearly established a remarkable fact: namely that the sizable U.S. advantage in real GDP per capita … is largely due to differences in total hours worked per capita.” This unwillingness to work is compounded by the political and economic leverage of big unions. Union rates in Canada more than double US rates [32 % vs. 14 %], though lower than in Western Europe [34 %, ranging from 12% in France to 45 % in Sweden]. Unionism increases costs, reduces flexibility and reduces productivity. The higher a society’s union membership rate, the worse off its economy.

We see the media bias in not reporting the above facts. Lower job creationism, higher tax rates and over-spending in Canada and the EU doom these societies to be also-rans in the world economy. The Canadians given their proximity and dependence on the US market where 40 % of GDP is tied to US trade are becoming uncompetitive. Yet such proximity also allows the Canadians to muddle through with bad policy choice in their socialist obsession with being different than the USA since they can count more or less, on US market access. The EU is in of course worse shape than Canada and will experience even graver economic and political dislocation as big government and militant Islam change the EU political-economy.

In the race to the top in international economic competition it is clear that both Canada and the EU need job growth and far reaching economic reforms. But don’t bet on the media covering that story.

Article Source: http://www.lifeweightloss.com

After working for a few large IT firms Read born in 1966, is currently an entrepreneur and Venture Capital Advisor and Managing Consultant for Wireless and Mobile technologies [including the internet] and in particular, in software applications for the Wireless or Mobile Industry. www.craigread.com/ RESOURCE: www.craigread.com/displayArticle.aspx?contentID=171&subgroupID=21

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