They can keep more of the money they earn from those extra hours of work each week and extra years of work later in life.
That?s one fact that stands out in James Glassman?s new Commentary article on Europe?s ?economic decadence.?
The result is that Americans produce and earn considerably more than Europeans. In the U.S. we make $47,000, compared with $36,000 in Germany and the UK, and $34,000 in France.1 In fact, as the Michigan State economist Mark Perry points out on his blog, Carpe Diem, citizens of America?s poorest state, Mississippi, have a higher GDP per capita than Italians, and Alabamans surpass Germans, French, and Belgians.
In his paper, [Nobel Prize winner Edward]Prescott fingered the culprit: high taxes. ?The surprising finding,? he wrote, ?is that this marginal tax rate [difference between Europe and the U.S.] accounts for the predominance of differences at points in time and the large change in relative labor supply over time.? Taxation rates on the next euro of income became so high that people were discouraged from working?especially with the enticements of early retirement.
Glassman goes on to note that taxes are higher in Europe because ?Europeans have chosen to have workers support non-workers in their leisure.? But Glassman contends those Europeans ?have taken the leisure side of the tradeoff to the extreme.?
Hence the mounting fiscal problems for nations such as Greece, Portugal, and Spain.
