Did the American Dream Emigrate to Europe?

Europe is not only overtaking the U.S. as the global economic leader but also as a leader whose corporate chieftains actually pay its rank and file decently. It sounds like we should rip some pages from their playbook.
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Mickey D's recent announcement that it's hiring 40,000 workers bodes ill for the future of job growth in America. According to the National Employment Law Project, while 40% of the jobs lost in the recession were in high-wage industries only 14% of new jobs created were, with 49% of new jobs paying less than $15 an hour. In other words, Mickey D's job growth is very likely driven by laid-off factory workers who need to grab McMuffins on the way to their new lousy jobs at Wal-Mart that they were forced to take when their unemployment benefits ran out.

When globalization is discussed it's usually focused on the outsourcing of factory and service jobs to low-wage emerging markets such as China and India. But the bigger news that's rarely covered is that high-wage Europe is not only overtaking the U.S. as the global leader but as a leader whose corporate chieftains actually pay its rank and file decently, provide them generous benefits and tend not to "divorce them," i.e., lay them off when economic times are challenging.

Americans can smugly dismiss the European Union's role as merely the bailer-outer of dysfunctional countries, i.e., Portugal, Ireland and Greece. But the more significant news isn't just that the New York Stock Exchange has been bought by NYSE Euronext and Deutsche Borse, but that as of 2007 the value of the European stock market surpassed that of the U.S., according to the excellent book Europe's Promise: Why the European Way in the Best Hope in an Insecure Age, by Steven Hill. Not surprisingly, the rising value is reflective of the fact that the European Union is now the world's wealthiest trading bloc, accounting for nearly a third of the world's economy -- almost as large as the U.S. and China combined, says Hill. From 2000 to 2005, Europe added jobs faster than the U.S., posting higher productivity gains and enjoyed a $3 billion trade surplus. Oh, and these Europeans pay high sales and income taxes. Take that, Rep. Paul Ryan!

Not only did Germany overtake the U.S. as the world's largest exporter in 2005, as pointed out in a 2006 Newsweek article entitled "Europe is a House Divided," but it did so by selling high-quality/cost goods produced by generously compensated workers -- its average hourly wage is $48, compared to $32 in the U.S.

A little-discussed feature of the European Union is that it's a partnership between large employers and their workers, not just between countries. Since 1994 when the EU issued a directive on works councils, defined as "composed of both employer and employees convened to discuss matters of common interest," every multinational company with at least 1,000 workers within the EU and 150 workers in each of two or member states must negotiate agreements with works councils if employees petition the employer to create one, Susan Ladka writes in a June 2005 HRMagazine article entitled "Working Together." Works councils not only enjoy veto power over job losses but have the right to meet with management to discuss mergers and the introduction of new technologies, says Hill in Europe's Promise.

In fact, works councils existed long before the EU did. According to a 2001 article in The Economist, "Europe: You're Fired," Germany had them after the Weimar Republic and after 1945 required any company with more than 500 employees to have a "supervisory board, in which workers hold one third of the seats. A few decades later, other countries in Europe followed suit, including Austria, France, Belgium, the Netherlands, and Sweden. While the UK resisted the notion at first, because, as The Economist put it, the British approach is "sack 'em now and argue afterwards" -- it ultimately passed local works council legislation a few years ago to meet a 2005 EU deadline, Ladka writes. Incredibly, as far as I can tell, no discussion or debate about creating works councils has ever taken the place within "sack-'em-now" American workplaces, much less on Capitol Hill.

So our counterparts in Europe are enjoying American-style prosperity while continuing to receive European style benefits, including health care, a free or cheap college education, pensions, and generous unemployment benefits.

Our biggest French fan, Alexis de Tocqueville, once said that, "The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults." Ironically enough, she need to rip some pages from the European playbook to figure out how to restore the American dream.

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