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.)