An aging population that values its free time set the stage for economic stagnation. Then came Covid-19 and Russia’s war in Ukraine.

Europeans are facing a new economic reality, one they haven’t experienced in decades. They are becoming poorer.

Life on a continent long envied by outsiders for its art de vivre is rapidly losing its shine as Europeans see their purchasing power melt away.

The French are eating less foie gras and drinking less red wine. Spaniards are stinting on olive oil. Finns are being urged to use saunas on windy days when energy is less expensive. Across Germany, meat and milk consumption has fallen to the lowest level in three decades and the once-booming market for organic food has tanked. Italy’s economic development minister, Adolfo Urso, convened a crisis meeting in May over prices for pasta, the country’s favorite staple, after they jumped by more than double the national inflation rate.

With consumption spending in free fall, Europe tipped into recession at the start of the year, reinforcing a sense of relative economic, political and military decline that kicked in at the start of the century.

Europe’s current predicament has been long in the making. An aging population with a preference for free time and job security over earnings ushered in years of lackluster economic and productivity growth. Then came the one-two punch of the Covid-19 pandemic and Russia’s protracted war in Ukraine. By upending global supply chains and sending the prices of energy and food rocketing, the crises aggravated ailments that had been festering for decades.

Governments’ responses only compounded the problem. To preserve jobs, they steered their subsidies primarily to employers, leaving consumers without a cash cushion when the price shock came. Americans, by contrast, benefited from inexpensive energy and government aid directed primarily at citizens to keep them spending.

In the past, the continent’s formidable export industry might have come to the rescue. But a sluggish recovery in China, a critical market for Europe, is undermining that growth pillar. High energy costs and rampant inflation at a level not seen since the 1970s are dulling manufacturers’ price advantage in international markets and smashing the continent’s once-harmonious labor relations. As global trade cools, Europe’s heavy reliance on exports—which account for about 50% of eurozone GDP versus 10% for the U.S.—is becoming a weakness.

Private consumption has declined by about 1% in the 20-nation eurozone since the end of 2019 after adjusting for inflation, according to the Organization for Economic Cooperation and Development, a Paris-based club of mainly wealthy countries. In the U.S., where households enjoy a strong labor market and rising incomes, it has increased by nearly 9%. The European Union now accounts for about 18% of all global consumption spending, compared with 28% for America. Fifteen years ago, the EU and the U.S. each represented about a quarter of that total.

Adjusted for inflation and purchasing power, wages have declined by about 3% since 2019 in Germany, by 3.5% in Italy and Spain and by 6% in Greece. Real wages in the U.S. have increased by about 6% over the same period, according to OECD data.

The pain reaches far into the middle classes. In Brussels, one of Europe’s richest cities, teachers and nurses stood in line on a recent evening to collect half-price groceries from the back of a truck. The vendor, Happy Hours Market, collects food close to its expiration date from supermarkets and advertises it through an app. Customers can order in the early afternoon and collect their cut-price groceries in the evening.

“Some customers tell me, because of you I can eat meat two or three times per week,” said Pierre van Hede, who was handing out crates of groceries.

Karim Bouazza, a 33-year-old nurse who was stocking up on half-price meat and fish for his wife and two children, complained that inflation means “you almost need to work a second job to pay for everything.”

Similar services have sprung up across the region, marketing themselves as a way to reduce food waste as well as save money. TooGoodToGo, a company founded in Denmark in 2015 that sells leftover food from retailers and restaurants, has 76 million registered users across Europe, roughly three times the number at the end of 2020. In Germany, Sirplus, a startup created in 2017, offers “rescued” food, including products past their sell-by date, on its online store. So does Motatos, created in Sweden in 2014 and now present in Finland, Germany, Denmark and the U.K.

Spending on high-end groceries has collapsed. Germans consumed 52 kilograms of meat per person in 2022, about 8% less than the previous year and the lowest level since calculations began in 1989. While some of that reflects societal concerns about healthy eating and animal welfare, experts say the trend has been accelerated by meat prices which increased by up to 30% in recent months. Germans are also swapping meats such as beef and veal for less-expensive ones such as poultry, according to the Federal Information Center for Agriculture.

Thomas Wolff, an organic-food supplier near Frankfurt, said his sales fell by up to 30% last year as inflation surged. Wolff said he had hired 33 people earlier in the pandemic to handle strong demand for pricey ecological foodstuffs, but he has since let them all go.

Ronja Ebeling, a 26-year-old consultant and author based in Hamburg, said she saves about one-quarter of her income, partly because she worries about having enough money for retirement. She spends little on clothes or makeup and shares a car with her partner’s father.

Weak spending and poor demographic prospects are making Europe less attractive for businesses ranging from consumer-goods giant Procter & Gamble to luxury empire LVMH, which are making an ever-larger share of their sales in North America.

“The U.S. consumer is more resilient than in Europe,” Unilever’s chief financial officer, Graeme Pitkethly, said in April.

The eurozone economy grew about 6% over the past 15 years, measured in dollars, compared with 82% for the U.S., according to International Monetary Fund data. That has left the average EU country poorer per head than every U.S. state except Idaho and Mississippi, according to a report this month by the European Centre for International Political Economy, a Brussels-based independent think tank. If the current trend continues, by 2035 the gap between economic output per capita in the U.S. and EU will be as large as that between Japan and Ecuador today, the report said.

On the Mediterranean island of Mallorca, businesses are lobbying for more flights to the U.S. to increase the number of free-spending American tourists, said Maria Frontera, president of the Mallorca Chamber of Commerce’s tourism commission. Americans spend about €260 ($292) per day on average on hotels compared with less than €180 ($202) for Europeans.

“This year we have seen a big change in the behavior of Europeans because of the economic situation we are dealing with,” said Frontera, who recently traveled to Miami to learn how to better cater to American customers. People enjoy the warm temperatures in a beach bar in the seaside resort of S’Arenal on Mallorca.

Weak growth and rising interest rates are straining Europe’s generous welfare states, which provide popular healthcare services and pensions. European governments find the old recipes for fixing the problem are either becoming unaffordable or have stopped working. Three-quarters of a trillion euros in subsidies, tax breaks and other forms of relief have gone to consumers and businesses to offset higher energy costs—something economists say is now itself fueling inflation, defeating the subsidies’ purpose.

Public-spending cuts after the global financial crisis starved Europe’s state-funded healthcare systems, especially the U.K.’s National Health Service.

Vivek Trivedi, a 31-year-old anesthesiologist living in Manchester, England, earns about £51,000 ($67,000) per year for a 48-hour workweek. Inflation, which has been about 10% or higher in the U.K. for nearly a year, is devouring his monthly budget, he says. Trivedi said he shops for groceries in discount retailers and spends less on meals out. Some colleagues turned off their heating entirely over recent months, worried they wouldn’t be able to afford sharply higher costs, he said.

Noa Cohen, a 28-year old public-affairs specialist in London, says she could quadruple her salary in the same job by leveraging her U.S. passport to move across the Atlantic. Cohen recently got a 10% pay raise after switching jobs, but the increase was completely swallowed by inflation. She says friends are freezing their eggs because they can’t afford children anytime soon, in the hope that they have enough money in future.

“It feels like a perma-freeze in living standards,” she said.

Huw Pill, the Bank of England’s chief economist, warned U.K. citizens in April that they need to accept that they are poorer and stop pushing for higher wages. “Yes, we’re all worse off,” he said, saying that seeking to offset rising prices with higher wages would only fuel more inflation.

With European governments needing to increase defense spending and given rising borrowing costs, economists expect taxes to increase, adding pressure on consumers. Taxes in Europe are already high relative to those in other wealthy countries, equivalent to around 40-45% of GDP compared with 27% in the U.S. American workers take home almost three-quarters of their paychecks, including income taxes and Social Security taxes, while French and German workers keep just half.

The pauperization of Europe has bolstered the ranks of labor unions, which are picking up tens of thousands of members across the continent, reversing a decades long decline.

Higher unionization may not translate into fuller pockets for members. That’s because many are pushing workers’ preference for more free time over higher pay, even in a world of spiraling skills shortages.

IG Metall, Germany’s biggest trade union, is calling for a four-day work week at current salary levels rather than a pay raise for the country’s metalworkers ahead of collective bargaining negotiations this November. Officials say the shorter week would improve workers’ health and quality of life while at the same time making the industry more attractive to younger workers.

Almost half of employees in Germany’s health industry choose to work around 30 hours per week rather than full time, reflecting tough working conditions, said Frank Werneke, chairman of the country’s United Services Trade Union, which has added about 110,000 new members in recent months, the biggest increase in 22 years.

Kristian Kallio, a games developer in northern Finland, recently decided to reduce his working week by one-fifth to 30 hours in exchange for a 10% pay cut. He now makes about €2,500 per month. “Who wouldn’t want to work shorter hours?” Kallio said. About one-third of his colleagues took the same deal, although leaders work full-time, said Kallio’s boss, Jaakko Kylmäoja.

Kallio now works from 10 a.m. to 4.30 p.m. He uses his extra free time for hobbies, to make good food and take long bike rides. “I don’t see a reality where I would go back to normal working hours,” he said.

Igor Chaykovskiy, a 34-year-old IT worker in Paris, joined a trade union earlier this year to press for better pay and conditions. He recently received a 3.5% pay increase, about half the level of inflation. He thinks the union will give workers greater leverage to press managers. Still, it isn’t just about pay. “Maybe they say you don’t have an increase in salary, you have free sports lessons or music lessons,” he said.

Mathias Senn, right, a butcher in Germany’s wealthy Black Forest region, couldn’t find local applicants to replace four workers who are preparing to retire, so he hired an apprentice from India, Rajakumar Bheemappa Lamani.

At the Stellantis auto factory in Melfi, southern Italy, employees have worked shorter hours for years recently due to the difficulty of procuring raw materials and high energy costs, said Marco Lomio, a trade unionist with the Italian Union of Metalworkers. Hours worked have recently been reduced by around 30% and wages decreased proportionally.

“Between high inflation and rising energy costs for workers,” said Lomio, “it is difficult to bear all family expenses.”

https://www.wsj.com/articles/europeans-poorer-inflation-economy-255eb629

From: https://groups.csail.mit.edu/mac/users/rauch/worktime/hours_workweek.html

from The Overworked American: The Unexpected Decline of Leisure, by Juliet B. Schor

 

See also: Productivity and the Workweek
and: Eight centuries of annual hours

The labouring man will take his rest long in the morning; a good piece of the day is spent afore he come at his work; then he must have his breakfast, though he have not earned it at his accustomed hour, or else there is grudging and murmuring; when the clock smiteth, he will cast down his burden in the midway, and whatsoever he is in hand with, he will leave it as it is, though many times it is marred afore he come again; he may not lose his meat, what danger soever the work is in. At noon he must have his sleeping time, then his bever in the afternoon, which spendeth a great part of the day; and when his hour cometh at night, at the first stroke of the clock he casteth down his tools, leaveth his work, in what need or case soever the work standeth. -James Pilkington, Bishop of Durham, ca. 1570

One of capitalism’s most durable myths is that it has reduced human toil. This myth is typically defended by a comparison of the modern forty-hour week with its seventy- or eighty-hour counterpart in the nineteenth century. The implicit — but rarely articulated — assumption is that the eighty-hour standard has prevailed for centuries. The comparison conjures up the dreary life of medieval peasants, toiling steadily from dawn to dusk. We are asked to imagine the journeyman artisan in a cold, damp garret, rising even before the sun, laboring by candlelight late into the night.

These images are backward projections of modern work patterns. And they are false. Before capitalism, most people did not work very long hours at all. The tempo of life was slow, even leisurely; the pace of work relaxed. Our ancestors may not have been rich, but they had an abundance of leisure. When capitalism raised their incomes, it also took away their time. Indeed, there is good reason to believe that working hours in the mid-nineteenth century constitute the most prodigious work effort in the entire history of humankind.

Therefore, we must take a longer view and look back not just one hundred years, but three or four, even six or seven hundred. Consider a typical working day in the medieval period. It stretched from dawn to dusk (sixteen hours in summer and eight in winter), but, as the Bishop Pilkington has noted, work was intermittent – called to a halt for breakfast, lunch, the customary afternoon nap, and dinner. Depending on time and place, there were also midmorning and midafternoon refreshment breaks. These rest periods were the traditional rights of laborers, which they enjoyed even during peak harvest times. During slack periods, which accounted for a large part of the year, adherence to regular working hours was not usual. According to Oxford Professor James E. Thorold Rogers[1], the medieval workday was not more than eight hours. The worker participating in the eight-hour movements of the late nineteenth century was “simply striving to recover what his ancestor worked by four or five centuries ago.”

An important piece of evidence on the working day is that it was very unusual for servile laborers to be required to work a whole day for a lord. One day’s work was considered half a day, and if a serf worked an entire day, this was counted as two “days-works.”[2] Detailed accounts of artisans’ workdays are available. Knoop and jones’ figures for the fourteenth century work out to a yearly average of 9 hours (exclusive of meals and breaktimes)[3]. Brown, Colwin and Taylor’s figures for masons suggest an average workday of 8.6 hours[4].

The contrast between capitalist and precapitalist work patterns is most striking in respect to the working year. The medieval calendar was filled with holidays. Official — that is, church — holidays included not only long “vacations” at Christmas, Easter, and midsummer but also numerous saints’ andrest days. These were spent both in sober churchgoing and in feasting, drinking and merrymaking. In addition to official celebrations, there were often weeks’ worth of ales — to mark important life events (bride ales or wake ales) as well as less momentous occasions (scot ale, lamb ale, and hock ale). All told, holiday leisure time in medieval England took up probably about one-third of the year. And the English were apparently working harder than their neighbors. The ancien règime in France is reported to have guaranteed fifty-two Sundays, ninety rest days, and thirty-eight holidays. In Spain, travelers noted that holidays totaled five months per year.[5]

The peasant’s free time extended beyond officially sanctioned holidays. There is considerable evidence of what economists call the backward-bending supply curve of labor — the idea that when wages rise, workers supply less labor. During one period of unusually high wages (the late fourteenth century), many laborers refused to work “by the year or the half year or by any of the usual terms but only by the day.” And they worked only as many days as were necessary to earn their customary income — which in this case amounted to about 120 days a year, for a probable total of only 1,440 hours annually (this estimate assumes a 12-hour day because the days worked were probably during spring, summer and fall). A thirteenth-century estime finds that whole peasant families did not put in more than 150 days per year on their land. Manorial records from fourteenth-century England indicate an extremely short working year — 175 days — for servile laborers. Later evidence for farmer-miners, a group with control over their worktime, indicates they worked only 180 days a year.

Sources

[1] James E. Thorold Rogers, Six Centuries of Work and Wages (London: Allen and Unwin, 1949), 542-43.

[2] H.S. Bennett, Life on the English Manor (Cambridge: Cambridge University Press, 1960), 104-6.

[3] Douglas Knoop and G.P. Jones, The Medieval Mason (New York: Barnes and Noble, 1967), 105.

[4] R. Allen Brown, H.M. Colvin, and A.J. Taylor, The History of the King’s Works, vol. I, the Middle Ages (London: Her Majesty’s Stationary Office, 1963).

[5] Edith Rodgers, Discussion of Holidays in the Later Middle Ages (New York: Columbia University Press, 1940), 10-11. See also C.R. Cheney, “Rules for the observance of feast-days in medieval England”, Bulletin of the Institute of Historical Research 34, 90, 117-29 (1961).

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Eight centuries of annual hours

13th century – Adult male peasant, U.K.: 1620 hours

Calculated from Gregory Clark’s estimate of 150 days per family, assumes 12 hours per day, 135 days per year for adult male (“Impatience, Poverty, and Open Field Agriculture”, mimeo, 1986)

14th century – Casual laborer, U.K.: 1440 hours

Calculated from Nora Ritchie’s estimate of 120 days per year. Assumes 12-hour day. (“Labour conditions in Essex in the reign of Richard II”, in E.M. Carus-Wilson, ed., Essays in Economic History, vol. II, London: Edward Arnold, 1962).

Middle ages – English worker: 2309 hours

Juliet Schor’s estime of average medieval laborer working two-thirds of the year at 9.5 hours per day

1400-1600 – Farmer-miner, adult male, U.K.: 1980 hours

Calculated from Ian Blanchard’s estimate of 180 days per year. Assumes 11-hour day (“Labour productivity and work psychology in the English mining industry, 1400-1600”, Economic History Review 31, 23 (1978).

1840 – Average worker, U.K.: 3105-3588 hours

Based on 69-hour week; hours from W.S. Woytinsky, “Hours of labor,” in Encyclopedia of the Social Sciences, vol. III (New York: Macmillan, 1935). Low estimate assumes 45 week year, high one assumes 52 week year

1850 – Average worker, U.S.: 3150-3650 hours

Based on 70-hour week; hours from Joseph Zeisel, “The workweek in American industry, 1850-1956”, Monthly Labor Review 81, 23-29 (1958). Low estimate assumes 45 week year, high one assumes 52 week year

1987 – Average worker, U.S.: 1949 hours

From The Overworked American: The Unexpected Decline of Leisure, by Juliet B. Schor, Table 2.4

1988 – Manufacturing workers, U.K.: 1856 hours

Calculated from Bureau of Labor Statistics data, Office of Productivity and Technology