An aging population that values its free time set the stage for economic stagnation. Then came Covid-19 and Russia’s war in Ukraine.

Europeans are facing a new economic reality, one they haven’t experienced in decades. They are becoming poorer.

Life on a continent long envied by outsiders for its art de vivre is rapidly losing its shine as Europeans see their purchasing power melt away.

The French are eating less foie gras and drinking less red wine. Spaniards are stinting on olive oil. Finns are being urged to use saunas on windy days when energy is less expensive.

Across Germany, meat and milk consumption has fallen to the lowest level in three decades and the once-booming market for organic food has tanked. Italy’s economic development minister, Adolfo Urso, convened a crisis meeting in May over prices for pasta, the country’s favorite staple, after they jumped by more than double the national inflation rate.

With consumption spending in free fall, Europe tipped into recession at the start of the year, reinforcing a sense of relative economic, political and military decline that kicked in at the start of the century

Europe’s current predicament has been long in the making. An aging population with a preference for free time and job security over earnings ushered in years of lackluster economic and productivity growth. Then came the one-two punch of the Covid-19 pandemic and Russia’s protracted war in Ukraine. By upending global supply chains and sending the prices of energy and food rocketing, the crises aggravated ailments that had been festering for decades.

Governments’ responses only compounded the problem. To preserve jobs, they steered their subsidies primarily to employers, leaving consumers without a cash cushion when the price shock came. Americans, by contrast, benefited from inexpensive energy and government aid directed primarily at citizens to keep them spending.

In the past, the continent’s formidable export industry might have come to the rescue. But a sluggish recovery in China, a critical market for Europe, is undermining that growth pillar. High energy costs and rampant inflation at a level not seen since the 1970s are dulling manufacturers’ price advantage in international markets and smashing the continent’s once-harmonious labor relations. As global trade cools, Europe’s heavy reliance on exports—which account for about 50% of eurozone GDP versus 10% for the U.S.—is becoming a weakness.

Private consumption has declined by about 1% in the 20-nation eurozone since the end of 2019 after adjusting for inflation, according to the Organization for Economic Cooperation and Development, a Paris-based club of mainly wealthy countries. In the U.S., where households enjoy a strong labor market and rising incomes, it has increased by nearly 9%.

The European Union now accounts for about 18% of all global consumption spending, compared with 28% for America. Fifteen years ago, the EU and the U.S. each represented about a quarter of that total.

Adjusted for inflation and purchasing power, wages have declined by about 3% since 2019 in Germany, by 3.5% in Italy and Spain and by 6% in Greece. Real wages in the U.S. have increased by about 6% over the same period, according to OECD data.

The pain reaches far into the middle classes. In Brussels, one of Europe’s richest cities, teachers and nurses stood in line on a recent evening to collect half-price groceries from the back of a truck. The vendor, Happy Hours Market, collects food close to its expiration date from supermarkets and advertises it through an app. Customers can order in the early afternoon and collect their cut-price groceries in the evening.

“Some customers tell me, because of you I can eat meat two or three times per week,” said Pierre van Hede, who was handing out crates of groceries.

Karim Bouazza, a 33-year-old nurse who was stocking up on half-price meat and fish for his wife and two children, complained that inflation means “you almost need to work a second job to pay for everything.”

Similar services have sprung up across the region, marketing themselves as a way to reduce food waste as well as save money. TooGoodToGo, a company founded in Denmark in 2015 that sells leftover food from retailers and restaurants, has 76 million registered users across Europe, roughly three times the number at the end of 2020. In Germany, Sirplus, a startup created in 2017, offers “rescued” food, including products past their sell-by date, on its online store. So does Motatos, created in Sweden in 2014 and now present in Finland, Germany, Denmark and the U.K.

Spending on high-end groceries has collapsed. Germans consumed 52 kilograms of meat per person in 2022, about 8% less than the previous year and the lowest level since calculations began in 1989. While some of that reflects societal concerns about healthy eating and animal welfare, experts say the trend has been accelerated by meat prices which increased by up to 30% in recent months. Germans are also swapping meats such as beef and veal for less-expensive ones such as poultry, according to the Federal Information Center for Agriculture.

Thomas Wolff, an organic-food supplier near Frankfurt, said his sales fell by up to 30% last year as inflation surged. Wolff said he had hired 33 people earlier in the pandemic to handle strong demand for pricey ecological foodstuffs, but he has since let them all go.

Ronja Ebeling, a 26-year-old consultant and author based in Hamburg, said she saves about one-quarter of her income, partly because she worries about having enough money for retirement. She spends little on clothes or makeup and shares a car with her partner’s father.

The eurozone economy grew about 6% over the past 15 years, measured in dollars, compared with 82% for the U.S., according to International Monetary Fund data. That has left the average EU country poorer per head than every U.S. state except Idaho and Mississippi, according to a report this month by the European Centre for International Political Economy, a Brussels-based independent think tank. If the current trend continues, by 2035 the gap between economic output per capita in the U.S. and EU will be as large as that between Japan and Ecuador today, the report said.

On the Mediterranean island of Mallorca, businesses are lobbying for more flights to the U.S. to increase the number of free-spending American tourists, said Maria Frontera, president of the Mallorca Chamber of Commerce’s tourism commission. Americans spend about €260 ($292) per day on average on hotels compared with less than €180 ($202) for Europeans.

“This year we have seen a big change in the behavior of Europeans because of the economic situation we are dealing with,” said Frontera, who recently traveled to Miami to learn how to better cater to American customers.

Weak growth and rising interest rates are straining Europe’s generous welfare states, which provide popular healthcare services and pensions. European governments find the old recipes for fixing the problem are either becoming unaffordable or have stopped working. Three-quarters of a trillion euros in subsidies, tax breaks and other forms of relief have gone to consumers and businesses to offset higher energy costs—something economists say is now itself fueling inflation, defeating the subsidies’ purpose.

Public-spending cuts after the global financial crisis starved Europe’s state-funded healthcare systems, especially the U.K.’s National Health Service.

Vivek Trivedi, a 31-year-old anesthesiologist living in Manchester, England, earns about £51,000 ($67,000) per year for a 48-hour workweek. Inflation, which has been about 10% or higher in the U.K. for nearly a year, is devouring his monthly budget, he says. Trivedi said he shops for groceries in discount retailers and spends less on meals out. Some colleagues turned off their heating entirely over recent months, worried they wouldn’t be able to afford sharply higher costs, he said.

Noa Cohen, a 28-year old public-affairs specialist in London, says she could quadruple her salary in the same job by leveraging her U.S. passport to move across the Atlantic. Cohen recently got a 10% pay raise after switching jobs, but the increase was completely swallowed by inflation. She says friends are freezing their eggs because they can’t afford children anytime soon, in the hope that they have enough money in future.

“It feels like a perma-freeze in living standards,” she said.

Huw Pill, the Bank of England’s chief economist, warned U.K. citizens in April that they need to accept that they are poorer and stop pushing for higher wages. “Yes, we’re all worse off,” he said, saying that seeking to offset rising prices with higher wages would only fuel more inflation. With European governments needing to increase defense spending and given rising borrowing costs, economists expect taxes to increase, adding pressure on consumers. Taxes in Europe are already high relative to those in other wealthy countries, equivalent to around 40-45% of GDP compared with 27% in the U.S. American workers take home almost three-quarters of their paychecks, including income taxes and Social Security taxes, while French and German workers keep just half. The pauperization of Europe has bolstered the ranks of labor unions, which are picking up tens of thousands of members across the continent, reversing a decadeslong decline.

Higher unionization may not translate into fuller pockets for members. That’s because many are pushing workers’ preference for more free time over higher pay, even in a world of spiraling skills shortages. IG Metall, Germany’s biggest trade union, is calling for a four-day work week at current salary levels rather than a pay raise for the country’s metalworkers ahead of collective bargaining negotiations this November. Officials say the shorter week would improve workers’ health and quality of life while at the same time making the industry more attractive to younger workers.

Almost half of employees in Germany’s health industry choose to work around 30 hours per week rather than full time, reflecting tough working conditions, said Frank Werneke, chairman of the country’s United Services Trade Union, which has added about 110,000 new members in recent months, the biggest increase in 22 years.

Kristian Kallio, a games developer in northern Finland, recently decided to reduce his working week by one-fifth to 30 hours in exchange for a 10% pay cut. He now makes about €2,500 per month. “Who wouldn’t want to work shorter hours?” Kallio said. About one-third of his colleagues took the same deal, although leaders work full-time, said Kallio’s boss, Jaakko Kylmäoja.

Kallio now works from 10 a.m. to 4.30 p.m. He uses his extra free time for hobbies, to make good food and take long bike rides. “I don’t see a reality where I would go back to normal working hours,” he said.

Igor Chaykovskiy, a 34-year-old IT worker in Paris, joined a trade union earlier this year to press for better pay and conditions. He recently received a 3.5% pay increase, about half the level of inflation. He thinks the union will give workers greater leverage to press managers. Still, it isn’t just about pay. “Maybe they say you don’t have an increase in salary, you have free sports lessons or music lessons,” he said.

At the Stellantis auto factory in Melfi, southern Italy, employees have worked shorter hours for years recently due to the difficulty of procuring raw materials and high energy costs, said Marco Lomio, a trade unionist with the Italian Union of Metalworkers. Hours worked have recently been reduced by around 30% and wages decreased proportionally.

“Between high inflation and rising energy costs for workers,” said Lomio, “it is difficult to bear all family expenses.”

  • Hello_there@kbin.social
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    1 year ago

    Fucking WSJ. Yes, a population that doesn’t care about upholding an arbitrary 40 hr workweek is the problem. Not increasing wealth gaps or deteriorations in social services.

    • cyd@lemmy.world
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      1 year ago

      Social services are funded by the government, so how much they hand out depends on the total size of the economy. That’s why it’s worrisome for the EU’s topline numbers to be backsliding against the US like this. It’s not something that can be handwaved away by saying Europeans like taking vacations.

      There are other problematic issues not mentioned in the article. A big part of the US growth success story is its high tech sector, which is doing pretty well even in the current troubled economic environment. In Europe, the most successful sector is luxury goods: things that arguably do not improve people’s quality of life at all.

      • Hello_there@kbin.social
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        1 year ago

        It’s also a problem to think that 40 hr weeks are behind the US productivity when multiple experiments with companies have shown no difference for having 4 day work weeks

  • delirium@lemmy.world
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    1 year ago

    Isn’t its everywhere in the world right now? Economic system is rigged towards the elites and thats what we have to deal with

    • cyd@lemmy.world
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      1 year ago

      You can see that it’s not cyclical from the US comparison. The US is subject to the same global economic environment and has decisively widened its lead.

    • Harry@kbin.social
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      1 year ago

      Most likely. This article is way to gloomy. Wait for what happens when the war in Ukraine is over, and hundreds of billions of euros of investment pour into Ukraine.

      • HerrVorragend@lemmy.world
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        1 year ago

        This will be interesting to see. I fear that a lot of new Ukrainian oligarchs will be made, who pocket the lion’s share.

  • HousePanther@lemmy.goblackcat.com
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    1 year ago

    It’s unfortunate to learn that that is going on in Europe. Still, the poorest Europeans often live better than much of the working class of Amurica.

  • Brainsploosh@lemmy.world
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    1 year ago

    Lol, this article has so many weirdly bad takes, the “facts” are only true for specific quarters, some are outright lies.

    They conveniently ignore that US real salaries dipped a lot more than EU at the start of the pandemic, mostly due to the business directed loans.

    Also, soo much AI-generated padding.

  • cyd@lemmy.world
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    1 year ago

    The statistic that always jumps out to me is that Mississippi has a higher median income than France.

    • afraid_of_zombies@lemmy.world
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      1 year ago

      That can’t possibly be true. The French have one of the best medical systems on earth what dollar/euro amount was assigned to that in the calculation?

      • cyd@lemmy.world
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        1 year ago

        You have to jump through a hoop or two to translate between definitions of median income, but here’s a rough cut.

        • For median household income, US data shows that Mississippi is at 70% of the national average.

        • For cross country comparisons, the OECD tracks a more technical statistic, the average household net adjusted disposable income per capita. By this measure, France is at US$34,375 a year. The US is at US$ 51,147 a year. So France is at 67% of the US average.

        Note that the OECD’s “average household net adjusted disposable income per capita” includes social benefits, so if France has a more generous social safety net, that actually juices its numbers up.

        • Wikipedia has a table on “median equivalent adult income” which does some more adjustments like normalising for household size. In this measure, France sinks even lower to around 60% of the US.
        • afraid_of_zombies@lemmy.world
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          1 year ago

          Yeah I don’t. Something is very wrong. It would take at least 15k USD a year to have insurance that gave you medical care even close to what the people in France have. Plus they have a world famous higher education system unlike Mississippi.

          I have been to Mississippi I havent been to France but I have been to Germany. They are not even close to equal.

          Oh wait you took an average? Gotcha. So Bill Gates is averaged out with people who don’t have sewage systems.

          • cyd@lemmy.world
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            1 year ago

            If you follow the links on the Wikipedia page (the one where France is at 60% of the US level), you’ll see they’re tracking median not mean. So it’s not skewed by Bill.

            And yes, the statistics are counter-intuitive, but that’s the point. People in Mississippi may have a worse university system and medical system than those in France, but the US is simply that much richer.