Chattering class socialists always "know what's best for us" but taking a look at European social engineering shows they don't have a clue out where the rubber meets the road. 

Thus, for women, paid working hours are getting longer; for men, they are falling. But unpaid working hours in household services, for both men and women, have been falling even faster. Thus, total work hours declined and leisure increased.

The second point made in the above quote is even more revealing. Apparently, it is the lower-educated, lower-income groups that are seeing the greatest expansion in leisure time. If the European Social Engineers are right and more leisure leads to a more meaningful and more satisfying life, the American model implies that the greatest beneficiaries of more flexible labor markets are the poor. This does make European complaints about increasing income inequality in the US somewhat fallacious.

Another myth is that Americans work more than Europeans. By now, a wealth of studies have found very little difference in work and leisure times between American and European employees, once one takes into the account the hours spent working in household production of trivial home services.

A January 2003 study from IZA-Berlin compared Americans and Germans and found that "...overall working time is very similar on both sides of the Atlantic. Americans spend more time on market work but Germans invest more in household production." According to the authors "...these differences in the allocation of time can be explained by differences in the tax-wedge and wage differentials."

The tax-wedge is a measure of tax burden that combines income tax, employment tax and consumption taxes to assess the overall effect of government levies on household income.

Ronald Schettkat of Utrecht University confirms that "...when time in household production is included, overall working time is very similar on both sides of the Atlantic" and shows that American men work almost exactly the same hours, paid and unpaid, as German men, while American women work actually 1.5 hours a week less than their German counterparts.

Conny Olovson of Stockholm University conducted a comparative analysis of the effects of tax regimes in Sweden and the US on labor market decisions by the households. The study found that while "market work per person is roughly 10% higher in the US than in Sweden, including home production on the side of work hours reduces the difference to approximately 1%". Just as before, higher labor and consumption taxes were responsible for the majority of the observed differences in the household decision to purchase or to supply home services using their own labor.

There is more to the story of the different labor markets found across the Atlantic than the simple home vs. firm production hours story told so far suggests. Thomas Sargent and Lars Ljungqvist in their 1997 paper show that the persistently high unemployment that plagued the European economies since the 1970s can be attributed to a large extent to the "welfare states' diminished ability to cope with more turbulent economic times, such as the ongoing restructuring from manufacturing to the service industry, adoption of new technologies and a rapidly changing international economy". Furthermore, the authors show that the European Social Welfare states' approach to the labor markets regulations is conducive to cumulative losses of skills in the economies with high unemployment rates.

According to the 2004 study by Stephen Nickel of the London School of Economics, "Comparing ... France, Germany and Italy with the United States, the difference in the tax wedge (around 16 percentage points) would explain ...around one quarter of the overall difference in the employment rate." The remainder can be attributed to other Social Welfare state features of the European model including the substantial differences in the social security systems and labor market institutions. Omitting Italy from consideration, Edward Prescott shows that the effective marginal tax on labor income accounts for most of the differences in labor supply across the Atlantic.

Finally, using the data for the OECD economies, Steven Davis of the University of Chicago and Magnus Henrekson of the University of Stockholm showed that during the mid 1990s "a tax rate difference of 12.8 percentage points was associated with 122 fewer market work hours per adult per year, a drop of 4.9 percentage points in the employment-population ratio, and a rise in the shadow economy equal to 3.8 percent of GDP. It also leads to 10 to 30 percent lower employment and value added shares in (a) retail trade and repairs, (b) eating, drinking and lodging, and (c) a broader industry group that includes wholesale and motor trade." To put this into perspective, the current tax wedge between the US and the EU15 stands at 18 percent.

All of this evidence does not bode well for the European model. While generating lower incomes than the US-styled approach to labor markets regulations and taxation, the so-called socially caring Welfare States of Europe effectively imprison large percentage of their population in perpetual unemployment. As the unemployed lose skills due to jobs absence, those in paid employment are forced by higher taxation of their income and consumption to waste their time off work on largely unproductive activities such as house work and DIY.

Less regulation and more flexibility in the labor markets, coupled with lower taxation of income and consumption, delivers in reality what the European model only promises in theory."

http://www.tcsdaily.com/article.aspx?id=051506G