Sunday, July 17, 2005

Is the Euro Area Really Worse On Jobs Than the US?

Below, I will first make an argument for treating the ratio of those with jobs to the total population, rather than to working-age population or to workforce, as the ratio that really matters.

After that, I'll calculate that ratio for the USA and Germany - with surprising results.

I already argued the first on this blog, but let's recap. We are often treated to projections of an exploding number of retirees, who will all live off of ever less working people's taxes/retiree fund contributions.

However, I think that picture ignores two important things: possible changes to retirement age, and real existing joblessness. If ever more retirees would be a root problem, the former would be a solution. But if we do that, we just increase the numbers of the jobless. In fact, even today, there is a practice of virtually reducing retirement age: when companies 'rationalise' by sending workers to early retirement.

Now, jobless people also 'live off' the taxes and contributions of those with jobs. So I think it would make more sense to measure the weight of society on the shoulders of workers by treating retired people and the jobless together.

But, once that thought has sunk in, one can go one step further. Children, while mostly not paid for by the state, are still a weight on the shoulders of those who work in financial terms: they too represent money not paid on themselves. If there are less old people and more children, the overall picture is the same. And there I am: the ratio that matters from a socio-economic perspective is that of people with jobs to that of the total population, whatever the demographics or the statistical tricks involved in counting the jobless.

Now, let's make the comparison across the pond.

In the USA, using the payroll survey that is said to be more reliable on overall numbers, there were a seasonally adjusted 133.537 million Americans in non-farm jobs in June. In the household survey, which is more reliable on relative changes (and has to be adjusted regularly), there were 141.638 million total with jobs. According to the population clock on the US Census Bureau, right now, there are 296,642,102 US residents. That gives a ratio of 45.02% for non-farm jobs in the payroll survey and 47.75% for jobs in the household survey.

For a European comparison, I take "economic basket-case" Germany. For people with jobs, I use the German Statistical Institute's May number, 38.84 million. For population, I'll take the latest number [pdf], the 82.501 million at the end of last year. The ratio is 47.08%.

So, in the end, there is barely a difference in the ratio of people who earn money and people who live from what others earn. In fact, if the US household survey errs upward in the absolute number of people with jobs, Germany may be ahead!

[Repost of my latest diary entry at EuroTrib]

In related matters, Scott Martens @ Fistful Of Euros takes on the meme that no French company in the top 25 was founded in the last 40 years, while 19 of the Top 25 American firms were...


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