Photograph Source: Archiwum Kancelarii Prezydenta RP – GFDL 1.2

There is a popular story circulating in the media that the European countries are in some sort of downward spiral, hopelessly behind the United States. It’s apparently a great story, since they have been running it for the last three decades.

I guess it makes our elites happy to think that the U.S. economy is somehow vastly outpacing the ones in Europe, but it has little to do with reality. As was the case three decades ago, European countries are on average somewhat poorer than the U.S. in monetary terms, but most of the gap is explained by the fact that they work less than we do.

Europeans on average have shorter workweeks and longer vacations. Having four to six weeks of mandated vacation time is the norm. So is paid parental leave. Europeans also tend to retire somewhat earlier than people in the United States, but that has not left them impoverished.

Here’s the picture if we look at per capita GDP, using a purchasing power parity measure of GDP. This is a measure of GDP that applies a common set of prices for all goods and services, regardless of which country they are produced in.

As can be seen, all the European countries included in the table have somewhat lower per capita GDPs than the United States. The gap is more for Southern European countries like Portugal and Greece and Eastern European countries like Bulgaria and Slovakia, but the wealthier European countries are the ones we typically look to for comparisons with the U.S.

In some cases, the gap is relatively small. Denmark is estimated to have a per capita income that is 99.8 percent of the United States level. In Netherlands the level of per capita GDP is 94.9 percent of the U.S. level. The gap is larger with Germany and France, as their per capita GDPs are 81.5 percent and 73.6 percent of U.S. GDP, respectively. The U.K. and Italy are still further down, at 71.4 percent and 70.8 percent, respectively.

However, these gaps seem less consequential when we consider that the average worker puts in considerably less time at their job in these countries than in the United States, as shown below.

In Denmark, the average worker puts in just 77.8 percent as many hours as an average worker in the United States. In Netherlands the ratio of hours is 80.5 percent. It is likely that most of these workers would gladly forego the relatively modest differences in income in exchange for far more leisure time.

The tradeoffs are closer with Germany and France, where workers put in 74.1 percent and 83.0 percent as many hours as their counterparts in the United States. In the U.K. and Italy, the ratio of the length of the average work years are 84.2 percent and 95.2 percent, respectively. That would seem to indicate that workers in the U.S. are getting a better deal, although more so in comparison to Italy than the U.K.

The story here is that at least compared to Western Europe, as has long been the case, most of the gap in income is explained by the fact that workers get more leisure time in Europe. This is a social choice. There is no economic basis for arguing that people should work longer hours to get higher incomes.

This is hardly a comprehensive analysis of well-being and living standards. Income is far more unevenly distributed in the United States than in European countries. This means that even if we have higher average income, for the median person, incomes might be higher in European countries. There are also issues like access to health care, which is pretty much universal in most European countries, although of very uneven quality.

In any case, these data show that we cannot make some blanket statement about the superiority of the U.S. economy based on the differences in per capita GDP. Most of the gap is explained by the greater amount of leisure in European countries and that is not a problem from an economic perspective.

This first appeared on Dean Baker’s Beat the Press blog.