Old Europe Goes to Work: Rising Employment Rates in the European Union

September 19, 2006

Contact: Karen Conner, (202) 293-5380 x117

September 19, 2006

Report shows increasing employment rates in Europe

For Immediate Release: September 19, 2006
Contact: Lynn Erskine, 202-293-5380 x115

WASHINGTON – Europe’s welfare states have steadily narrowed their traditional employment gap with respect to the United States, according to a report by the Center for Economic and Policy Research. The employment gap between the United States and Europe has shrunk considerably since 2000, falling to 1.1 percentage points in 2005 for prime-age workers.

The report, Old Europe Goes to Work: Rising Employment Rates in the European Union, by economists John Schmitt and Dean Baker, concludes that Europe has nearly closed the employment gap with the United States for workers aged 25 to 54 years old. The shift reflects both declining employment rates in the United States and increasing employment rates in Europe.

“Europe has really turned things around at the same time that the United States has been struggling,” said Schmitt. “Employment rates for prime age workers (25 to 54 years old) are a good test of Europe’s success in generating employment.”

Key findings in the report:

Europe has nearly closed the employment gap over the course of this decade. In 2000, the overall employment rate for prime-age workers in the U.S. was 5.0 percentage points higher than the corresponding rate in Europe. By 2005, the fall in the U.S. employment rate and a rise in the European employment rate reduced the gap to 1.1 percentage points.

The small remaining difference between EU and U.S. employment rates is primarily due to low employment rates among women in Italy and Spain.

Three traditional welfare states – Denmark, the Netherlands and Sweden – have been the best performers. In 2005, prime-age employment rates were higher in the Netherlands (81.5 percent), Denmark (83.9 percent), and Sweden (87.7 percent) than in the United States (79.3 percent).

In 2005, France had a slightly higher employment rate for prime-age workers than the United States did. Remarkably, the higher overall employment rate in France was entirely due to higher employment rates among French women.

Employment rate vs. Unemployment rate: Analyzing the employment rate has several advantages over the unemployment rate. In particular, the employment rate provides a better measure of an economy’s success in incorporating women into the paid workforce.