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Roman holiday

Money | The roots of European economic stagnation go back to the 1960s and '70s

Issue: "New Orleans' comeback kids," Oct. 22, 2005

Western Europe over the past few months had the classic trappings of labor unrest: millions of workers walking out on their jobs, and companies, unable to hire replacement workers, struggling to cope with the loss.

You probably didn't read about it in the news, though, because it wasn't a strike; it was summertime as usual in France, Germany, and other European nations. Every year, a large portion of the full-time European work force leaves work at the same time, taking advantage of lavish paid vacation and holiday time mandated by law.

European leaders-looking for some politically possible way to shore up an economy that has been mired in slow growth and high unemployment for decades-this month lit on the idea of having workers spread their vacation and holiday time throughout the year.

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"We can't permit in Europe a situation where for three months in the summertime we don't function because of the summer holidays," said European Union competition chief Neelie Kroes in a committee hearing in Brussels. "The serious economic situation in Europe really pushes us to do better. Everybody needs holidays, but we can spread it."

But many economic analysts on the other side of the Atlantic say that while Ms. Kroes' diagnosis is accurate, her prescription isn't nearly strong enough. The problem isn't so much the timing of European holiday and vacation days, it's the sheer number of them.

The roots of European economic stagnation go back to the 1960s and '70s. Strong labor unions in Europe pushed for laws mandating that workers receive several weeks of paid vacation and numerous extra holidays. The unions also achieved high minimum wage laws and rules making it very difficult to fire workers.

This was supposed to create a workers' paradise, and Europeans indeed work fewer weeks than Americans work, and fewer hours when they actually are on the job (see table). But combine that with laws that encourage very early retirement, and a lot of work in Europe ends up being left undone.

High minimum wage laws and the rules against firing actually compound the problem. These make the creation of a job a very expensive (and often a lifetime) proposition for companies, so few of them hire new workers. The result is an unemployment rate among Europe's largest economies that is twice as high as America's.

But a generation of Europeans has grown up under the culture of leisure and cannot imagine any other way. "Most French, German, and Italian voters simply refuse to accept the necessity of a Thatcher/

Reagan-style economic revolution," writes German journalist Olaf Gersemann in The American Enterprise. "Things will have to get even worse before many Europeans realize the depth of their countries' stagnation."

The irony is that the pursuit of happiness through more and more leisure seems to have become a treadmill for Europeans. A Harris Interactive poll from two years ago found that only 17 percent of Germans described themselves as "very satisfied" with their lives, along with 16 percent of Italians and 14 percent of the French. Meanwhile, 57 percent of Americans reported that they were very satisfied.

A problem this profound has no easy solution, and the staggering of vacations and holidays is probably not the final answer.

Timothy Lamer
Timothy Lamer

Tim is managing editor of WORLD magazine.

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