Chart of the week
"Europe is a museum"
What does this chart show?
Labor productivity in the EU is 80% of the US level of labor productivity.
Why does it matter?
The EU has a population of 450mm and GDP of $20.3T, while the US has a population of 345mm and GDP of $29T.
Given stagnant1 productivity growth in the EU, the only way for their economy to grow is through population growth of workers, but by 2040, the EU’s workforce is estimated to shrink by ~2 million workers/year while the proportion of retired to working people is projected to increase from 25% to 33%. Without an increase in EU labor productivity, they will only be able to sustain their current GDP level until 2050.
The EU relatively missed translating the internet revolution into productive economic outcomes and is now poised to miss the AI revolution. The tech sector accounts for nearly all of the productivity differences between the EU and US over the last 20 years.
The Bottom Line
Barring meaningful regulatory, fiscal, and investment changes in the EU (the new US administration may be the wake-up call), Europe will likely remain an economic museum.
Chart & Data Source - The future of European competitiveness by Mario Draghi
