The Productivity Fallacy
Is working yourself silly really worth it? More important, is it wise?
With a regularity that’s as frustrating as it’s tiring, articles about productivity appear that are arguing productivity in the European Union is lagging, especially with regards to that in the United States. This post—“Four thoughts on Eurosclerosis”—by
is a recent one. However, I think such articles are comparing apples with pears, plus I’m of the opinion that a lower productivity is a good thing.Before I start my arguments, a few caveats:
• The European Union, like the United States, is not a homogeneous state. In the US laws and regulations—outside the federal ones—differ from state to state. Likewise, in the EU laws and regulations—outside the official European Union laws—differ from country to country;
• Therefore—especially in the case of the EU—averages or median do not make much sense; that is, they fail to tell the whole story. For example, when I checked statistics for ‘cost of living’, they varied so much between different EU countries that producing an average or median is an exercise in futility;
• In general, I’m not going to overwhelm you with statistics and graphs, as this topic is too complicated and diverse to be captured in a few soundbites and graphics;
• Hence I’ve decided take my personal situation as a benchmark, because that is one point where I have reliable statistics. While my situation is typical for The Netherlands, I have the strong impression—in my day job I meet a lot of people from across the world, and mostly from the EU—that it’s fairly typical for the EU at large;
Apples and pears.
Comparing productivity per capita between the EU and the USA is—as the saying goes—comparing two essentially different things; that is, comparing apples with pears.
For one, there is productivity per capita and there is productivity per hour. So the “EU versus US labour productivity 1980-2022” graph at
’s piece states that the European productivity is about 80% in comparison to that of the 100% of the US (a number that also the European Central Bank mentions). And while this includes the fact that EU workers make less hours per year—we have shorter work weeks and considerably more paid holidays—I suspect it might overlook something else, namely a certain EU initiative.
The Right to Disconnect is a EU guiding principle that gives workers the right not to be disturbed during their time off. It’s not an official law in all EU countries (althought the utost majority follow the directive) and not all EU workers will use that right (I do), but I think it’s fair to say that the average US worker will be working much more outside their normal working hours than the average EU worker (and I strongly suspect this phenomenon is not included in the productivity statistics). How much that makes a difference is impossible to qualify, even though I’ll give it a try in this footnote1. Therefore, I feel safe in my assumption that the effective income per hour difference between the average EU and US worker is less than 10%.
However, the average income depends on more than just productivity. So let’s look at the numbers. Since hard statistics—the ones mentioning actual numbers like money earned instead of setting one year (often 2015) at 100% and index from there on—on average EU earnings and costs are very hard to find, I’m using the numbers of The Netherlands. According to Wikipedia:
• The average income per person in the US in 2023 was $80,526;.
• The average income per person in The Netherands in 2023 was $65,640.
Aha, you say, a difference of $15,000. Correct. But let’s look at the expenses side of this equation, and to healthcare costs in particular. According to this article in The Guardian, the US pays much more for healthcare than 9 other countries (apart from Australia and Canada, the other 7 countries are from Europe). According to that article, the people in the US pay $13,000 per year on healthcare, on average.
According to Eurostat, average healthcare spend per capita in the EU in 2020 was $3,269. So EU citizens spend $9,700 less on healthcare per year. Average healthcare spend in The Netherands in 2020 was $4,032, reducing that $15,000 income gap to $6,000.
Next I wanted to compare cost of living, but the statistics I found about this are about individual countries, not an EU average. So, while the average US worker has more disposable income than the average EU worker, the cost of living may differ. The best I can do is look at my personal situation. According to World Population review, in 2022 the CoL index for the USA is 74.20 and that for The Netherlands is 67.50 (where the cost of living in New York is indexed at 100). According to Numbeo, the CoL index by country for 2024 Mid-Year is 70.4 for the US and 63.1 for The Netherlands. A fairly consistent difference of 7 percentage points. When looking at the rent index (on the same Numbeo website), that difference remains the same.
Thus, while the average worker in The Netherlands makes about 81.5% in comparison to the average worker in the USA, the Cost of Living in The Netherlands is 7% lower. On top of that, the Numbeo index does not consider healthcare costs, which are 16% of total income for the US, while they are 6% of total income for The Netherlands. Add that all up, and the difference between the two is only a few percentage points.
Then there’s quality of life. In the Numbeo quality of life index for mid-2024, my country—The Netherlands—ranks second (after Luxembourg), with a quality of life index of 207.5. The USA ranks twelfth, with a quality of life index of 185.5. If this index is correct, then I—the average Dutch worker—am enjoying a quality of life that is 12% higher than that of the US.
Finally, there’s life expectancy. According to World-O-Meter, The Netherlands was ranked 25 for life expectancy2 (82.3 years on average—80.7 for males, 83.9 for females), and the US was ranked 49 (79.46 on average—77 for males, 82 for females).
So basically the typical male slacker from The Netherlands will—on average—live more than three years longer than the productive male US bee. Also, while the average Dutch worker will have aproximately 3% less spending power than their USA counterpart, they have a quality of life that’s 12% higher.
And while many of you may file all the above links and comparisons under lies, damned lies and statistics, I suspect—all in all—that’s it’s not quite that bad in the EU, after all.
What type of productivity?
In the meantime, the US industry lags far behind in the areas of shipbuilding and offshore wind farms—this where the EU leads. And despite Tesla, it’s also lagging with Electric Vehicles and solar panels—this is where China leads. And—in stark contrast with AI, which only consumes more resources—these technologies increase sustainable forms of energy generation, which are direly needed to fight the climate crisis.
So should productivity go to AI castles in the sky, or renewable energy projets down to Earth3?
The Fallacy of Productivity.
Most pieces about productivity do not mention the environmental costs of all that productivity. There is a limit to what this planet Earth can sustain, meaning that there is a cap on both population and productivity (until we can go into space en masse, which is still quite a bit off).
So, yes, the average population in the EU is aging (as it is in Japan, China, South Korea, Taiwan, and other countries). This is partly because the average age of people in the EU is higher than that in the USA. With a higher life expectancy—most probably powered by a higher quality of living—in combination with lower birth rates comes an ageing population. Is that so bad?
In order not to destroy the planet, population growth most stop at some point. On top of that, productivity must be capped, as well. It’s the sum of productivity per person that consumes our planet’s resources, which are limited. As such, several Western-European countries (and Japan, South Korea, and Taiwan) would have a close to zero or even negative population growth without immigration. This is a necessary condition for population growth to stop, eventually (and hopefully at a level that the planet can bear).
That this is already happening in several EU countries is, in my opinion, a good thing. We cannot grow forever, we have to change into a zero-growth economy, if we want future generations to have a habitable planet. So the EU’s lower productivity in combination with a higher quality of living is a good thing.
If productivity keeps going up, the climate crisis will worsen, pollution and environmental degradation will increase. So the answer is not more productivity but better productivity; that is, we should produce equipment (solar panels, wind turbine farms, EVs, heat pumps, etcetera) that address the climate crisis, in order to ensure there will be a liveable planet in the future.
I’m a science fiction writer and fan, so I’m not against progress per se. It’s just that we need to focus on the right type of progress. This means I will be very happy if we develop robots that, in combination with a controlled form of (non-sentient) AI, can take over laborious work (robots that can reap the harvest, anyone?) or become carers for our ageing population (there is an ongoing shortage of healthcare people). That will move us forward, not AIs that plagiarise paintings or writing on a massive scale.
Increasing productivity (and increasing the world’s population) will eventually render this planet inhospitable. This is what I call ‘the fallacy of productivity’ that way too many economic pundits keep preaching. Productivity is a tool, a means to an end, not the end goal itself. When we use productivity as the Holy Grail to be worshipped at any cost, we will render this planet uninhabitable. When we use productivity in a wise manner, it can contribute to saving this planet.
Author’s note: I wanted to post this before the weekend, but got so lost in researching statistics that at some point I lost track. Take all the statistics with a pinch of salt and follow the main thrust of this essay, namely that working less hard and more effectively is better for you and better for the planet.
As always, welcome to a new subscriber, many thanks for reading and spread the word!
Interestingly, Wikipedia has two lists of countries by labour productivity. The first one—admittedly from 2019—has the GDP per working hour of the US in the sixth spot at 73.70 $/hr. with every other country in the 13 being from Europe (unfortunately no EU average in there). More interestingly, the second list from the International Labour Organization (which is from 2023) lists the US on position 12 at 69.70 $/hr, while the top 8 are European countries (again, unfortunately no EU average here).
It’s almost impossible to find numbers of EU labour productivity in $/hr. So I’m using a roundabout way: from 2005 to 2016, German labour productivity was about 106% of that of the EU (according to Statistica). In 2019, German labour productivity was $68.85 per hour (see Wikipedia link above), so let’s estimate that of the EU at 100/106 x $68.85 = $64.95 per hour. That of the USA was $73.70 per hour, meaning the EU average about 88% in comparison with the USA in 2019.
Suppose the Germany/EU ratio still holds, then the 2023 numbers—according to the International Labour Organization in the same Wikipedia link—where Germany is listed as $68.1 per hour, which would put the EU at $64.24 per hour. The USA is listed at $69.70, which puts the EU at 92% of the USA’s 100%. Thus, I strongly suspect these numbers do include the fact that Europeans work less hours per year than Americans, reducing that productivity gap considerably;
Make no mistake, the average life expectancy is higher in Mediterranean countries (and in Japan, South Korea, and Taiwan);
A rhetorical question;