Chapter 2

Strong International Competitiveness

Diverse indicators highlight the strengths of the U.S. economy and labor market.  The successful record of the United States across a broad range of indicators and over an extended time period is remarkable for a mature industrial economy. 

The fact that the United States has achieved these results in the face of growing world-wide competition and other challenges, both natural and man-made, is a further testament to the robustness and resilience of an economic system based on free and open markets.  High and growing output per capita, growing employment, high labor force participation rates and employment-population ratios, strong productivity growth and low unemployment relative to other nations reflect the energy, creativity, skills, flexibility and competitiveness of American workers and employers

• The strength and productivity of American workers are reflected in high per capita output.  U.S. per capita gross domestic product (GDP) was $39,900 in 2004, the most recent year for which broad international comparisons of per capita GDP can be made on a purchasing power adjusted basis.
• Among member countries of the Organization for Economic Cooperation and Development (OECD), the United States ranked near the top in terms of GDP per capita.  Only Luxembourg, Norway, and Ireland (not shown in the figure) had higher per capita GDP.  Among large major economies, U.S. per capita GDP was more than 20 percent higher than that of Australia or Canada.
• Among the largest members of the European Monetary Union (Eurozone), per capita GDP ranged from $25,300 in Spain to $29,600 in France.[9]  Overall, U.S. per capita GDP was 34 percent higher than in Japan.

• Underlying the United States’ high per capita GDP is our dynamic, productive workforce.  On average, each hour on the job contributed $46.30 to domestic output.  Among the large, major economies shown, only France achieved greater GDP per hour worked ($47 per hour), but lower effort resulted in lower per capita output for France compared to the United States.
• Other Eurozone countries exhibited less efficiency, and the Eurozone as a whole had an average GDP per hour of $40.30 in 2004.  Indeed, a number of European economies, as well as Canada and Australia, posted figures more than $10.00 per hour lower than the U.S. figure. 

• Hours worked per capita is a single measure of the labor activity across the population – taking into account both the proportion of the population that is employed and the number of hours people work.  In 2004, per capita hours worked totaled 859 hours, placing the United States in the same neighborhood as Australia and Canada. 
• South Korea easily surpassed these countries by posting 1,122 hours per capita.  The gap reflected the 2,394 hours an average South Korean employee worked per year in 2004; in contrast, an average U.S. worker worked 1,808 hours.
• On the flip side was France’s relatively low hours per capita.  Here lies the difference between per capita GDP in the United States and France.  In broad terms, the two countries’ workers are similarly productive, but the French simply work fewer hours.

• At 5.1 percent, the U.S. unemployment rate in 2005 was well below that of most of its European peers.  Both Japan and South Korea benefited from even lower rates, continuing long-term trends for both countries. 
• The United Kingdom’s unemployment rate has hovered around 5 percent for several years, after trending down from over 10 percent in 1993.  The U.S. unemployment rate edged down further by mid-2006.  In May, it reached a nearly 5-year low of 4.6 percent.

• The labor markets of both the United States and the European Union (EU-15) are quite similar in size and make for interesting comparisons.[10]  Between 1990 and 2005, civilian employment in the United States rose 19.3 percent, while the comparable measure for the EU-15 rose 11.1 percent.  Employment clearly has increased in both areas, but the EU-15 has outpaced the United States in employment growth for only five of the past 15 years, most notably during and after the last two U.S. recessions, 1990-91 and 2001.  
• Since 2003, the United States again has taken the lead, while a number of European countries have seen somewhat stagnant employment growth, most notably France and Germany. 
• Like much of Europe, Japan has experienced poor employment growth in recent years.  Japan saw six consecutive years of employment declines between 1997 and 2003.  The subsequent recovery has boosted employment only slightly.

• In addition to tepid job growth, a common thread between Japan and Europe is the incidence of long-term unemployment, defined as a spell of unemployment lasting at least 12 months.  In Japan, the long-term unemployed account for one-third of the total in 2005; in the European Union, the figure was over 44 percent.  Even the United Kingdom’s share doubled the roughly 12 percent seen in the United States.