Monday, August 01, 2005

I'll probably fail this assignment 

Another request received this morning, from spelling challenged Learned Foot, asking me for a treatment of Paul Krugman's latest. Oy.

It's true that France's G.D.P. per person is well below that of the United States. But that's because French workers spend more time with their families.

O.K., I'm oversimplifying a bit. There are several reasons why the French put in fewer hours of work per capita than we do. One is that some of the French would like to work, but can't: France's unemployment rate, which tends to run about four percentage points higher than the U.S. rate, is a real problem. Another is that many French citizens retire early. But the main story is that full-time French workers work shorter weeks and take more vacations than full-time American workers.

The point is that to the extent that the French have less income than we do, it's mainly a matter of choice.

This argument isn't actually new: Olivier Blanchard has been making these same points that Krugman makes for some time now.

The entire point of French labor policy has been to legislate shorter workweeks. I'm sure Krugman knows that, he's just "oversimplifying a bit". And it's not a choice, it's the law, which as Don Luskin points out has been recently been changed to allow people to work more overtime. Since 1998, there has been a law that mandated a 35-hour work week and prohibition on overtime in excess of 13 hours, presumably to permit work to be spread over more workers. Luskin links to a newer paper by Alesina, Glaeser and Sacerdote which is supposed to refute the Blanchard-Krugman hypothesis. If it was a choice made, then we would see reports that people were more satisfied with life now in Europe with shorter working hours than they were before. It turns out, however, that they are. (Luskin offers this poll as an alternative.) It is certainly possible, therefore, that Europeans prefer that tradeoff, even though it appears to move one to a suboptimal level of employment.

Part two of my assignment from LFoot is a Lori Sturdevant piece in this morning's STrib, citing Art Rolnick of the Minneapolis Fed saying the size of Minnesota government is "just about right". Well, he didn't really say that. He said that if the economy is still growing faster than the national average, then high taxes must not be hurting us too much. What he didn't say was whether they were dragging us down to where we might be in the absence of those taxes. Rolnick thinks the key is to look at population growth:

Rolnick says the indicator to watch is population growth. If it starts lagging projections, that would be a sign that people no longer think Minnesota's government is providing enough of the public goods and services needed for a high quality of life.
Now, think about these two pieces. If the French are having a ball with more leisure on their hands, wouldn't they want to have more kids? But France has had declining marriages, an increasing share of births coming from parents born outside of France, and a median age for marriage that is now 28.5 years from 23 years old in 1980. (Source.) Meanwhile, in Minnesota the size of households is falling.

Choice? Or response to the price of government?

UPDATE: Tim's right, I should not have the however in that sentence.