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Race to the bottom – European Employment Costs and the US

Race to the bottom. Mercer has released a new study of European employment costs. The graphs are very pretty and well-made and worth a look. Hélas, the European numbers are compared in a very disapproving tone with American ones:

Chart 3 highlights a major challenge facing Europe over the next 20 to 40 years: the serious financing difficulties of “pay-as-you-go” systems and the possible resultant damage to the global competitiveness of European countries.

Overall, the EU is approximately 15% dearer than the US. However, when only the original 15 EU member states are considered, the US is cheaper by approximately 23%.

The US has more people in prison, no universal medical plan, lousy schools, very expensive post-secondary education, massive poverty – why on earth is the US still being held up as some kind of role model? On top of the domestic problems, the US is the only country engaged in an overseas war of colonisation at the present time.

The US is not a role model for anything except military plutocracy.

More interesting to me is the difference in employment costs between Austria and France. The average employee in France costs about 47,000 euros/year including benefits. The average employee in Austria costs about 29,000 euros/year. Or in even simpler terms – it costs only about two-thirds as much to employ someone in Austria.

Part of the difference is the much smaller part of salary which is taken by social security in Austria, even though there is almost as much social security available in Austria.

There is comparatively little abuse of the system in Austria. I know almost no one who is unemployed and collecting unemployment benefits. Even the alternative crowd with whom I spend most of the time is gainfully employed somewhere. If they take three months off, it is on their own savings and not les assedics (unemployment).

Moreover, your Austrian employee would not be on the thirty-five hours (les trente-cinq heures) and would be more conscientious at work.

What is more depressing about the Mercer conclusions – although they are glib and predictable – is that the answer in this era of globalisation is just to move one’s facilities (whether factories or offices) to low-cost zones:

The cost of social security and mandatory programmes is largely outside employers’ control. However, given that costs are already high and may increase further in some countries, employers need to be aware of the potential impact on future profitability. 

A sustained, focused search for the most cost-effective delivery of pay and benefits is not a luxury. Many companies are considering the migration of their production to another country. In recent months, Mercer’s International practice has been involved in corporate restructures where, in one instance, production was moved from Germany to Italy and in another, from Germany to Poland and Hungary.

Constantly moving facilities from one country to another in a quest for the lowest possible operating costs, while it may be a short-term solution for the individual companies will solve nothing at the international level. Not everyone in Austria can be a knowledge worker. Each country is made up of the Alphas and Betas of Aldous Huxley. While a certain number of betas can be employed in the service sector within a national economy dedicated to only advanced knowledge work, factories and workshops and farming must be distributed among the nations. Nothing else can work.

The consequences of the ghettoization of countries into economic categories will be serious.

First, there will be no one to buy the goods so efficiently produced at low-cost. The only sector worth working for will be luxury goods for the privileged few.

Second, there will be large-scale social unrest, not to speak of revolution, as the masses are left without gainful employment in the advanced economies.

It is amazing to me that the business analysts all seem to have done their training in Louis XVI’s finance ministry in the early 1780’s.

What might work – although it boggles the mind to think of it – would be the kind of forced mass emigration practiced by Joseph Stalin (and to a lesser degree by Imperial England). Don’t have enough money to continue to live in Europe? Sell off your last possessions and board the boat for Bangladesh. They need factory workers there – we don’t need any here.

Inverse image. The top university in Bangladesh. The best graduates of the computer science and math programs immediately signed to London companies and taken to the airport on graduation to work in the bowels of the City.

In such a model, it will be impossible for the bottom end countries to advance far as they will be constantly bled of their best minds.

Nationality and culture will disappear in an accounting scheme, for what becomes an international slavery ring run by the world’s major corporations. The US government with their Walmarts and private security seem to be headed down this path, hoping to drag the rest of the world after them. For the moment, the Europeans resist.

Who wants to see their neighbours (selves) pushed onto a boat for Bangladesh?

(Apologies to the Bengalese in advance – I have not visited your beautiful country, economic travails and transition apart. An ommission I hope to rectify at a future date.)


  1. Bushwick Bill Bushwick Bill

    America’s certainly not perfect. It’s not Utopia. Nor is it the Dystopia that you and other anti-Americans see it as. I view you anti-Americans as the mirror-image of those you hate. You give America no due for what is good about her, and seek to blame America for everything, just as your hated counterparts acknowledge no American mistakes.

    Most of America’s social problems (high incarceration rates, perceived “rotten” schools, no national health insurance scheme) result from the large population of Third Worlders living in our midst. Granted, we did it to ourselves, by importing slaves (albeit under the approving eyes of our then colonial masters) who never shed their Third World ways, and now cause no end of social problems. This massive Third World population is a burden Europe never faced until recent decades, for you generally only tolerated slavery (and those who would be enslaved–Third Worlders) in your colonies, not in the mother countries. Foolishly, you Europeans decided after WWII that your economies needed additional workers, workers who could only come from the Third World. Now, Europe is being inundated with fecund Third Worlders. Your social problems will dwarf America’s in a matter of decades. It’s likely we’re witnessing the extinction of European peoples. You’ll pardon me for experiencing a little schadenfreude. All and all, I’m sad that Europe is being destroyed from within. But you can’t blame a guy for enjoying seeing Europe suffer and die from the same ills Europe so long accused America of. ha ha! Europe’s dying! ;) America will bury you.

  2. The slaves are still being brought in Bill. There is no idea of social justice or a labour shortage involved – they are just being brought in as a stick to beat the working man with. You don’t want to work for $8 an hour? Well, I’ve got five guys here who’d be happy to have the job at $5/hour!

    Figuratively speaking. The salaries depend on the field.

    You really haven’t addressed the macroeconomic questions raised in the original article though.

  3. Bushwick Bill Bushwick Bill

    Alec said:
    “The slaves are still being brought in Bill. There is no idea of social justice or a labour shortage involved – they are just being brought in as a stick to beat the working man with. You don’t want to work for $8 an hour? Well, I’ve got five guys here who’d be happy to have the job at $5/hour!

    Figuratively speaking. The salaries depend on the field.”

    They’re not slaves, not even figuratively speaking. These Third Worlders risk their lives and their life savings trying to reach the USA, and once here endure lives of squalor, because they now have food in their bellies, a roof over their heads, and can save money to send home to their families, or–worse for Americans–to save up to send for their families.

    That said, no one wants to secure American borders more than I do. One reason I so loathe Geo. Bush is because he is completely unconcerned with the problem of illegal immigration. GW Bush is in the pocket of the businessmen who benefit from undocumented laborers, laborers to whom they can pay a fraction of what they’d have to pay American laborers–white or black–and for whom no benefits (read retirement and health care) are paid.

    The problem is, the American Left wants these illegal immigrants to keep coming for reasons of their own. The American left hates traditional white America, and wants to see it killed off, and is doing it’s best to achieve that by transforming America into a Third World cesspool.

    So the American working and middle class gets it from every direction, from the Right business class, who want cheap labor, and from the Left Marxists, who hate traditional America.

    “You really haven’t addressed the macroeconomic questions raised in the original article though.”

    I have to plead ignorance, because I don’t know what the solution is. I agree with you completely that each nation needs to manufacture, that no nation can be a “service only” economy. I sometimes use the analogy that America has to manufacture because otherwise, what will we all do, survive by delivering pizzas to each other? I think an American senator made the same point before me (Byrd of W. Virginia, perhaps), saying we can’t all do each other’s laundry. Every time I force myself to stroll through a Wal-Mart here in Middle America, I pick up items at random and look for place of manufacturer. Almost all of the “shit” available for purchase in Wal Mart–that most middle American of places–is manufactured in China. Is that sustainable? I don’t think so. What’s the answer? I have no friggin’ clue. Have you, Alec? If you do, please let me know, I’m very interested to find a way out of this ‘race to the bottom.”

  4. Bushwick Bill Bushwick Bill

    Alec said:
    “The slaves are still being brought in Bill. There is no idea of social justice or a labour shortage involved – they are just being brought in as a stick to beat the working man with.”

    Oh, just to follow up on this, you can mark my words, if America ever decides to get its act together on the illegal immigration issue and start to deal with it, the same people like Alec who now criticize America for “importing slaves” when there is no labor shortage will criticize America for dealing with the problem, that is, deporting millions of Third Worlders. Mark my words. Because to the haters–the people like Alec for whom nothing America has done or will ever do is “good”–it will be just another tool with which to beat up on Americans. “Look at the evil Americans, expelling poor people who have committed no crimes other than to have crossed some “artificial” border! How evil those Americans are!”

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