...decades of the 1970s with a renewed political energy that led to deregulation, increased competition, reduction of marginal tax rates, and restructuring of corporations, which later facilitated the immediate adoption of the innovations from the information revolution. Europe, instead, seemed "stuck:" incapable of gathering sufficient energy to reform itself. This was especially the case for the largest countries: Germany, France, Italy, and Spain.

What Happened?

Let's start with the basics. One of the most remarkable facts about Europeans is that they work much less than Americans. Europeans worked more than Americans in the 1950s and 1960s, when they were lowering their heads in the war reconstruction efforts, first, and then during a period of boom. But then Europeans began to work fewer and fewer hours per capita. While in the early 1970s hours worked per person were about the same in Europe and in the United States, today the French, German, and Italians work about 1400 hours per person per year versus about 1800 hours per person in the United States.

There are three reasons why work hours per person are lower in Europe: 1) fewer people are in the labor force (early retirements, lower worker participation, delayed entry into the labor force, all in various combinations depending on the country); 2) more vacation time for those who do work; 3) lower hours in a "normal" work week. In different proportions for different countries, all three factors matter. For instance, in Italy the first factor, lower participation, is the driving force. In France and Germany, all three factors explain about a third each of the difference with the United States.

Europeans are working less and less for three reasons: first, increasing marginal tax rates (especially...

NOTE: All illustrations and photos have been removed from this article.



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