Monday, April 27, 2015

Europe is further down the drain

Than the US is.  This week's  Economist showed a couple of telling charts.  Chart 1 shows the European tax load for each employee.  The Euro average is 30%.  Each employee hired, hikes the employer's taxes by 30% of the new hire's wages.  In short, new employees cost 30% more in taxes that what the company has to pay them.  Pricey.
   In the US the tax load is only 20%. 
   And we have a graph of "protection against layoffs", on an arbitrary scale.  Europe has an average of 2.5, with Portugal leading the pack at 3.  The US is only 0.25.  The Brits are doing better than the European average at 1.0.   Granted it's nice for workers to be protected against layoffs.  But it slows the overall economy if companies know they cannot layoff workers when business gets bad.  To avoid being stuck with  well paid workers with full benefits, companies simply do not hire.  Which accounts for Europe's horrible unemployment rate.     Supporting data for the notion of American exceptionalism.  America's economy is far better than the EU economy because of less tax load on employment and more labor mobility, companies are willing to hire and grow because they know they won't be stuck with unneeded workers in a business slowdown. 
   The Europeans have much cushier social welfare, but the cost is massive unemployment.   Which would you rather have, a job, or cushy government benefits and unemployment for 10% of the workforce?

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