More work, more growth? The American model under the microscope

More work, more growth? The American model under the microscope
More work, more growth? The American model under the microscope

Greater growth in the United States than in Europe

In 2024, the United States forecasts economic growth of 2.1%, followed by an increase of 1.7% in 2025. In contrast, in the euro zone, more modest GDP growth is expected, estimated at 0.6% in 2024 and 1.3% in 2025. The short-term outlook remains mixed due to tighter credit conditions, although the situation is expected to gradually improve as incomes strengthen.

The significant growth gap between the United States and Europe is food for thought. America’s economic superiority is generally attributed to its abundant natural resources and superior capacity for innovation. However, Nicolai Tangen, the head of Norway’s gigantic sovereign wealth fund, Norges, offers a different perspective. He suggests that the real reason behind this American economic dynamic is the amount of work provided by Americanswhich is significantly higher than that of their European counterparts.

A difference in the pace of work

In Europe, labor regulations are much stricter than in the United States. Limits on weekly working time, such as the 35-hour week in France, directly impact the number of hours worked. According to the OECD, an American works 1811 hours per year on average, or 15% more than a European (1571 hours). As a result, the average annual salary of an American (around 70,123 euros) is higher than that of a Frenchman (around 40,000 euros). By 2024, the United States is expected to offer the highest average salaries among OECD countries. Furthermore, the rights obtained by unions, such as paid leave, tend to reduce the time spent at work compared to the United States where such regulations are less restrictive.

Cultural differences also play a major role. The American model, where long hours and dedication to the office are valued, results in robust economic growth and GDP per capita significantly higher than that of many European countries. In the USA, success is often measured by career progression and wealth accumulation, thus pushing individuals to maximize their working hours. In Europe, on the other hand, a greater balance between professional and personal life is sought, particularly after the pandemic, accentuating the desire of workers to reduce their hours in the office.

A real impact on economic growth

The United States, known for its economic model based on a heavy workload, displays an economic performance that clearly differs from that of Europe. In 2023, gross domestic product (GDP) per capita in the United States was $85,370, illustrating a clear progression since 2016, when it was $58,180. In comparison, France, representative of European economies, saw its GDP per capita increase from $38,350 in 2016 to $47,360 in 2023.

This gap, which has increased from 50% to 80% in seven years, reflects more vigorous American growth, fueled in part by a greater quantity of work, thus reflecting increased productivity. Although Americans work more, they do not necessarily enjoy a better quality of life. Despite increased commitment to work, many would like to reduce their hours, while Europeans, with fewer working hours, enjoy a better quality of life and extended life expectancy.

The increase in taxation in question in Europe and in France?

In 2021, the average tax rate on an American’s income was 15.7% according to the OECD. In comparison, in France, the income tax rate is 45%. According to economist Edward Prescott, increasing income taxes in Europe have reduced the motivation to work morewidening the gap with the United States, where lower taxes encourage more work hours.

It should be noted, however, that across Europe, tax rates for single, average-earning workers vary widely, with some countries having the highest tax burdens. At the top of the list, Denmark taxes at 55.9%, followed closely by Austria at 55%, Portugal at 53%, Sweden at 52.3%, and Belgium at 50%. These countries are generally those in Western Europe and among the most developed, reflecting a high level of public services financed by these taxes. In contrast, countries like Romania, Bulgaria, Bosnia and Herzegovina, Kosovo, and North Macedonia have the lowest rates, at just 10%.

Why do the Danes support their high taxes?

Danes perceive high taxes not as a burden, but as a strategic investment in the future of the country and the quality of their daily life. This outlook is reinforced by Denmark’s consistent ranking as the second happiest country in the world, according to the 2023 World Happiness Report. With a tax rate reaching 55.9%, citizens benefit from a high level of public services which directly contributes to their general well-being.

High taxation in Denmark finances a more egalitarian society, providing uniform opportunities to all its citizens, regardless of gender or socioeconomic status. Education, particularly higher education, is largely financed by the state, reducing the economic burden on families. Furthermore, the Danish “flexicurity” system guarantees flexibility in the labor market while providing security and support, notably through extended parental leave and a safety net in the event of unemployment.

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