This week, I came across two Our World in Data charts on Europe’s productivity gap with America and went down a bit of an econ rabbit hole. In the output-per-hour series, German productivity more than doubled between 1990 and 2022, compared with a roughly 70 per cent increase in America:

Our World in Data chart of growth in GDP per hour worked, 1990–2022, using Penn World Table output-side international prices: Austria rises about 127%, Germany 109%, and the US, France and UK about 70%; Italy rises 64%.

Yet America pulled ahead on GDP per person.

Our World in Data’s Europe–US GDP per capita growth chart, adjusted for inflation and purchasing power, 1990–2025: the US gains more than the UK, Germany, Austria, France and Italy. Its GDP measure and end year differ from the preceding productivity chart.

With all the Euro summer memes1 in the back of my mind, I thought perhaps Europeans had just used some of their productivity gains to buy time off, while Americans kept working and took the money.

I then found one problem with reading the difference as time off, and shortly afterwards, many more. The charts use different GDP measures (as well as different end years). The productivity series adjusts international prices across several benchmark years. For comparing growth, the Penn World Table recommends its national-accounts measure.

Using that measure for both countries, I get hourly productivity growth of 61 per cent in Germany and 68 per cent in America between 1990 and 2022. France reaches 39 per cent and Italy 21 per cent. Faster American productivity growth explains some of the income divergence before we get to working hours.

Europe–US comparison of growth in GDP per hour worked in six countries, 1990–2022, using two Penn World Table GDP measures with identical labour inputs. Germany changes from 109.5% under international prices to 61.0% under national-accounts growth; the US changes from 69.9% to 68.3%, France from 70.6% to 38.8%, and Italy from 64.0% to 20.7%.

Working hours still explain part of the difference. But shouldn’t we count all the hours worked across the population?

$$ \frac{\text{GDP}}{\text{population}} = \frac{\text{GDP}}{\text{hours}} \times \frac{\text{hours}}{\text{workers}} \times \frac{\text{workers}}{\text{population}} $$

Average annual hours can fall while more people enter employment. That is what happened in France and Italy. From 1990 to 2022, hours per worker fell by about 8 per cent in both countries. Hours per resident were roughly unchanged in France and rose slightly in Italy.

Europe–US comparison of changes in hours per worker and per resident, 1990–2022: US −2.5% and −3.4%; Germany −15.3% and −7.7%; Austria −15.8% and −6.0%; France −8.0% and approximately zero; Italy −7.7% and +1.0%; UK −5.4% and −1.5%. Rising employment offsets shorter individual hours in the five European countries shown.

Germany’s hours per resident fell by 7.7 per cent. America’s fell too, by 3.4 per cent. Between 1995 and 2019, Germany’s hours per resident rose while America’s fell.

Ageing changes the arithmetic as well. In Germany, the share of people aged 15–64 fell from 69.0 to 63.6 per cent between 1990 and 2022. America’s declined much less. More retirees can lower hours per resident even when workers keep the same schedule.

Still, an IMF study of European working hours finds that desired hours fell alongside actual hours, particularly among men and younger workers. People appear to want some of the shorter week they are getting. Pension rules, taxes and childcare arrangements shape those choices, and less paid work can mean more unpaid work at home.

The flattering version of this story is that Europeans looked at American incomes and decided they would prefer August. I would be receptive to that argument, particularly in August. On the other hand, Europe’s fragmented markets and shortage of risk capital make it harder for promising firms to grow. That can mean less income without any extra time off, which is a fairly poor holiday policy.

  1. Link leads to Facebook. Apologies. ↩︎