US Health Care: High Cost and Mediocre Results

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Health Expenditures as Share of GDP, OECD Countries, 2011

A.  Introduction

The botched rollout of the new health care insurance exchanges, through which individuals without employer sponsored health insurance are to sign up for private insurance under the new Obamacare system, has focused renewed attention on the problems in the US health insurance system.  The software has been a disaster.  The rollout has also had to face the determined opposition of the Republican Party, which has done whatever it can to block or undermine this extension of health care to those now without insurance.  Most Republican governors (27 out of 30) refused to set up state health insurance exchanges, thus adding to the federal burden, even though decentralized state-based systems have traditionally been the preference of conservatives.  And with a few exceptions, most of these governors have also refused to extend Medicaid, thus denying health insurance to the working poor (and thus denying payments as well to hospitals that provide services to these poor), even though federal funds will pay for 100% of the costs for the first three years and 90% thereafter.  Republicans in Congress have blocked whatever funding they could for implementation of the system, and have blocked or delayed appointments of key officials responsible for implementation of the system.

It remains to be seen whether this complex system can be implemented despite this determined opposition.  And it is a complex system not out of the preference of liberals (who generally would have preferred simply extending the Medicare system to all), but as part of the political compromises necessary to get a system that would extend health insurance to those not now covered.  Decentralized health insurance with an individual mandate, the most controversial part of Obamacare, was originally proposed by the conservative Heritage Foundation in 1989, and was then championed by Republicans in Congress in 1993 as the conservative alternative to the health care proposals of the Clinton Administration.

But Obamacare is limited.  Its focus is on extending the availability of health care to millions of Americans now without health insurance, and not on health care costs.  While there are provisions in the Affordable Care Act (aka Obamacare) designed to lower costs and improve the efficiency of the US health care system, they are modest.  There is nonetheless evidence that even these modest provisions in the Affordable Care Act have accounted for at least some of the slow-down in health care costs in recent years.  But few expect that these provisions, by themselves, will suffice.

This blog post will be the first in a series that will discuss the problems with the US health care system, why there are these problems, and what might be done to address the problems.  This first post will compare the US to other high income countries in terms of the overall cost of health care, and in the results obtained.  Future posts will look at additional data that can help us understand the causes of the problems; will discuss the inherent problems that arise in a system of decentralized health insurance that make it such a problematic industry; and then will discuss what could be done to establish a competitive market-driven process, based on individual choice, that will lead to efficient health care outcomes.

B.  The High Cost of the US Health Care System

The graph at the top of this post shows total health care expenditures (both public and private) as a share of GDP for each OECD member country.  The OECD issues each year the most comprehensive set of data on health care statistics available for its member countries, with attention paid to making these statistics as comparable as possible across the countries.  The data used in this post, including in all the graphs below, come from the 2013 data set, which was released in June 2013.  The data provided is for 2011 (or for the nearest available year).  All the major high income countries of the world are OECD members, and OECD membership in recent decades has been extended to countries such as Mexico, Chile, Korea, and many of the previous communist countries of Central Europe.

As the graph above shows, the US stands out prominently from the rest of the world in what it spends.  The US spends close to 18% of GDP on health care, while no other OECD country spends even 12% of GDP, and the OECD average is just 9.3% of GDP.  That is, the US spends 50% more than the next highest country on health care as a share of GDP, and almost double what the average OECD country spends.  If US health care costs could be cut by 6% of GDP just to the highest being spent by anyone else in the world, the savings would be about $1 trillion per year.  This is huge.

And just to show that this result is not somehow a consequence of using GDP share rather than absolute dollar amounts, the graph below shows how the US compares to other OECD members in terms of the absolute amount spent per capita in dollar terms (at purchasing power parity):

Health Expenditures in PPP$, OECD, 2011

The US again stands out.  The US spent $8,508 per capita in 2011, or 50% more than the next highest county (Norway, which spent $5,669 per capita, with Switzerland just slightly less).  The OECD average was only $3,322, so US spending was over two and a half times as much.

C.  The High US Expenditures Did Not Lead to Greater Health Services 

Did the higher spending on health care in the US lead to greater delivery of basic medical services?  There is no one single measure of “basic medical services”, but one can examine a few important ones.

To start, did the high level of spending in the US lead to more doctors being available?  The answer is no:

Health - Physicians per 1000 Population, OECD, 2011

Despite the high spending in the US, there are only 2.5 doctors per 1000 of population available in the US, which is 23% less than the OECD average of 3.2.  Surprisingly perhaps, there were over 6 doctors per 1000 of population in Greece, while Austria was second highest at 4.8.

How about doctor consultations?

Health - Doctor Consultations per Capita, OECD, 2011

There were only 4.1 doctor consultations per capita in the US in 2011, which was 40% less than the OECD average of 6.9.  Japan had 13.7 doctor consultations per capita.

Perhaps the greatest investment in basic medical care is in hospitals.  Did the high US spending lead to greater hospital availability?  Again, the answer is no:

Health - Hospital Beds per 1000 population, OECD, 2011

The US had only 3.1 hospital beds per 1000 of population in 2011, which was 40% less than the OECD average of 5.2.  Japan stands out from the others with 13.9 hospital beds per 1000 of population (4 1/2 times as many as in the US), followed by Korea at 9.6.

Despite the lower availability of hospital beds, was the US able to work in a similar or higher number of patients into that more limited capacity?  Again the answer is no:

Health - Hospital Discharges per 100,000 population, OECD, 2011

There were 13,091 hospital discharges per 100,000 of population in the US in 2011, which was 18% less than the OECD average of 16,057.  While the utilization rate of the existing hospital capacity was somewhat higher in the US than in the OECD average, this higher utilization rate was not sufficient to offset the lower capacity.  Austria had the highest number of hospital discharges per 100,000 of population at 28,063, more than double the US rate.

With more limited hospital capacity, what was the average length of stay?

Health - Hospital Average Length of Stay in Days, OECD, 2011

The average length of stay in a hospital in the US was only 4.9 days.  Only Mexico had less among the OECD members at 4.1 days.  The OECD average was 8.1 days, or 65% higher than for the US.

In summary, despite the fewer doctors in the US and fewer doctor consultations, and despite the far more limited days of an average hospital stay in the US and the lower number of hospitalizations and hospital bed capacity in the US, the US still spent on health care close to double what the average OECD country spent as a share of GDP, and two and a half times as much in absolute dollar terms.

D.  The High US Expenditures Did Not Lead to Better Health Outcomes

The ultimate goal is of course good health outcomes.  Availability of doctors and hospital services is just a means to an end, and not an end in itself.  How does the US compare in terms of such outcomes?

First, one of the most common measures of the effectiveness of a health system is the infant mortality rate.  This is a measure that is sensitive to the availability and quality of the care mothers and infants receive.  The US rates poorly on this measure:

Health - Infant Mortality Rate, per 1000 Live Births, OECD, 2011

The infant mortality rate in the US was 6.1 per 1000 live births in 2011.  Only Mexico, Turkey, and Chile were worse.  The US rate was 50% worse than the OECD average of 4.07.

Overall life expectancy is another common measure of the quality of the health care system.  Did the high US expenditures on health lead to a significantly higher life expectancy?  No:

Life Expectancy at Birth, Total Population, OECD, 2011

US life expectancy in 2011 was 78.7 years, below the OECD average of 80.1 years.  The US rate was worse than that of two-thirds of the OECD members.  And the only OECD members that ranked below the US have far lower average incomes.

Life expectancy is not a terribly sensitive measure of health care outcomes in an absolute sense, as the range from the highest to the lowest is relatively narrow.  It is still meaningful in terms of ranking countries, but health experts find more useful a more sensitive measure that takes into account the age at which a death occurs.  The measure “Potential Years of Life Lost” (or PYLL), is defined as the number of years lost from an early death, up to an upper limit set at age 70 (by the OECD; some others might use age 75 or something else).  Thus a death at age 50 is taken as 20 years of potential life lost, and counts as twice as much as a death at age 60.  The upper limit taken (70 in the OECD data) is essentially arbitrary, but as a relative measure across countries is fine as long as it is uniform.

Does the high spending in the US lead to a better outcome by this measure?  Again, no:

Health - Potential Years of Life Lost, per 100,000, Males, OECD, 2011

For males, the PYLL per 100,000 population for the US was 5,814 in 2011.  This was 26% higher than the OECD average of 4,633.  Only Mexico and four countries of Central Europe had significantly worse rates than the US (Chile was only a bit higher, and data was not available for Turkey).  But incomes in these countries are far less than that of the US.

For females:

Health - Potential Years of Life Lost, per 100,000, Females, OECD, 2011

The US is the third worst at 3,447 (only Mexico and Hungary were worse), or 43% above the OECD average of 2,415.

In summary, the US ranks exceedingly poorly in terms of outcomes such as infant mortality or life expectancy.  The only countries that rank worse are ones that are not only far poorer, but also spend far far less on health per capita.  The US spends $8,508 per capita per year on health care (in 2011), and the only countries that rank worse on the outcome measures spend less than $2,000 per year, and some (Mexico and Turkey) less than $1,000 per year.

E.  The Relative Performance of the US Has Worsened Over Time

The graphs above present a snap shot of the relative performance of the US in 2011.  But perhaps the high levels of US spending has led to an improvement in the relative ranking of the US over time?  Again the answer is no:

Health - US vs HI OECD, 1960 to 2010:11

The comparisons here are taken relative to a sub-set of only the High Income OECD countries.  While the trends would have been the same had the average for all current OECD members been used, a number of the more recent members (such as Mexico and Korea) were quite poor early in the period being covered here.  A comparison only to the High Income OECD members is more fair.  The High Income OECD members are defined as the US, Canada, Japan, Australia, New Zealand, and most of Western Europe (excluding Greece, Portugal, and Ireland).

Over the period 1960 to 2011, the US always spent considerably more than the High Income OECD average on overall health expenditures.  In 1960, US spending as a share of GDP was 36% above the average, with that then falling somewhat (although erratically) up to 1978, where it hit a trough that was still 23% higher than the others.  After that it rose sharply, and in 2011 US spending as a share of GDP was 69% higher than the High Income OECD average.

This consistently higher, and substantially higher, spending did not, however, lead to improving outcomes on a relative basis.  The infant mortality rate in the US was roughly equal (indeed about 1% better) than the High Income OECD average in 1960.  But by 2011, infant mortality was 75% higher in the US than in the other countries.  And the Potential Years of Life Lost measures show a similar deterioration.  The US PYLL measures were already 18% and 12% worse in 1960, for males and females respectively, and this then deteriorated to 53% and 57% worse in 2010 (there is not yet US data for 2011).

The high levels of US spending compared to the others did not lead to an improvement in the relative ranking of the US.  Instead, US health outcomes have deteriorated substantially relative to other High Income OECD members over the last 50 years.

F.  The Poor Record for the US Cannot Be Blamed on a High Share of Public Expenditure in the Total Spent on Health

Finally, one can use this same OECD data set to look at whether the poor US performance relative to the other OECD members can be ascribed to a high share of public expenditures in total health expenditures.  Conservatives assert that the public sector is inefficient compared to the private sector, and hence might see this as a possible explanation of the poor US performance.

Anyone who knows even a bit about health systems in other countries will, of course, know that the share of public spending is far higher in those countries than in the US.  But here are the figures:

Health - Public Expenditures as Share of Total Health Expenditures, OECD, 2011

A large number of countries in Western Europe, as well as Japan and New Zealand, have the public sector accounting for over 80% of total health expenditures.  The Netherlands is the highest at 86%, but several others are close.  And most of the rest of Western Europe spends over 70% of health expenditures through the public sector.  The OECD average is 72%.

But the US spends only 48% of its health expenditures through the public sector.  This includes Medicare, Medicaid, the Veterans Administration, a number of special programs for children, health for federal retirees, and other programs.  Only Mexico and Chile spend a smaller share than the US through the public sector, and they are close to the low US share.

If private spending was more efficient than public sector spending on health, the US would be at the very top of the performance measures.  Instead it is at the bottom.

G.  Conclusion

There can be little dispute that the US health care system and its funding is a disaster.  The system as a whole is extremely expensive:  The US spends close to 18% of GDP on health care, while no other country spends even 12%.  This extra 6% of GDP on what health care costs in the US compared to anyone else in the world comes to $1 trillion each and every year.  And it is this high and rising cost of health care which is the primary driver of rising future fiscal deficits, if nothing is done.  Despite such high expenditures, the US health outcomes are mediocre at best.

Why is such a wasteful system sustained, and why is the Republican Party pushing so aggressively to block Obamacare and revert to the system as we have had up until now?  One has to suspect that the primary reason is precisely that $1 trillion of excess expenditures each year.  That $1 trillion goes to someone, and hence enormous vested interests have been created that benefit from the current excess.  These include not only the insurance companies, but also pharmaceutical and medical device firms, many hospitals (a profitable business for several large firms), and others.  Future blog posts will explore this further, and present recommendations on what might be done.

The Obama Bull Market in Equity Prices Continues

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S&P500 Index, March 9, 2009, to Nov 19, 2013

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   Bull Market Rallies Since 1940
  Ranked by overall growth in real terms
    Nominal % Real % Real Rate
Start Date End Date Change Change of Growth
Dec 4, 1987 Mar 24, 2000 582% 361% 13%
Jun 13, 1949 Aug 2, 1956 267% 222% 18%
Aug 12, 1982 Aug 25, 1987 229% 181% 23%
Mar 9, 2009 Nov 15, 2013 166% 141% 21%
Apr 28, 1942 May 29, 1946 158% 124% 22%
Oct 22, 1957 Dec 12, 1961 86% 76% 15%
Oct 9, 2002 Oct 9, 2007 101% 75% 12%
Jun 26, 1962 Feb 9, 1966 80% 69% 16%
May 26, 1970 Jan 11, 1973 74% 57% 19%
Oct 6, 1966 Nov 29, 1968 48% 37% 16%
Oct 3, 1974 Nov 28, 1980 126% 34% 5%
         

Equity prices reached record levels on November 18, with the S&P 500 index hitting 1,800 in mid-day trading and the Dow Jones Industrial Average hitting 16,000, before both closed lower.  While any such index numbers are arbitrary, it might be timely for a brief update of a blog post from March of this year on the boom in equity prices, to see where things now stand.  That blog post noted that equity prices have boomed under Obama, to the extent that the stock market rally that began soon after he took office has been one of the largest of the last seven decades.

Since March, that rally in equity prices has continued.  The graph at the top of this post shows the path for the S&P 500 stock market index (a capitalization-weighted index that is generally taken as the benchmark for the market), from its trough on March 9, 2009, to its most recent peak (in terms of its daily closing price) on November 15.  It has now increased by 166% in nominal terms, and by 141% in real terms, since that low-point just six weeks after Obama was inaugurated.

The table above fits the on-going rally into all the bull market rallies since 1940.  These rallies are defined as increases in equity prices of 25% or more in nominal terms before ending with a correction of 20% or more.  The calculations are based on figures originally provided by Barry Ritholtz on his web site (which were in turn based on Merrill-Lynch figures), which were used in my March blog post.

There have been 11 such rallies since 1940, and the Obama market rally is now the fourth largest among these.  Since it is still on-going, it could also move up further in rank.  And the pace of the increase has been rapid.  The real rate of growth in equity prices over the course of this rally (of 21% per annum up to this point) is the third highest of any of these rallies.

Conservatives continue to charge that Obama’s policies have been terrible for business and for the economy.  Yet if that were true, one would not expect equity prices to be booming.  I should hasten to add that this rally could, of course, end tomorrow.  Stock market rallies always come to an end.  But until it does, it is hard to reconcile the view of conservatives that Obama has been bad for business with what we see happening in the markets.

Growth in France and the US: The Bottom 90% Have Done Better in France

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France vs US, 1980-2012, GDP per capita overall and of bottom 90%

A.  Introduction

Conservative media and conservative politicians in the US have looked down on France over the last decade (particularly after France refused to join the US in the Iraq war, and then turned out to be right), arguing that France is a stagnant, socialist state, with an economy being left behind by a dynamic US.  They have pointed to faster overall growth in the US over the last several decades, and average incomes that were higher in the US to start and then became proportionately even higher as time went on.

GDP per capita has indeed grown faster in the US than it has in France over the last several decades.  Over the period of 1980 to 2007 (the most recent cyclical peak, before the economic collapse in the last year of the Bush administration from which neither the US nor France has as yet fully recovered), GDP per capita grew at an annual average rate of 2.0% in the US and only 1.5% in France.

But GDP per capita reflects an average covering everyone.  As has been discussed in this blog (see here and here), the distribution of income became markedly worse in the US since around 1980, when Reagan was elected and began to implement the “Reagan Revolution”.  The rich in the US have done extremely well since 1980, while the not-so-rich have not.  Thus while overall GDP per capita has grown by more in the US than in France, one does not know from just this whether that has also been the case for the bulk of the population.

In fact it turns out not to be the case.  The bottom 90%, which includes everyone from the poor up through the middle classes to at least the bottom end of the upper middle classes, have done better in France than in the US.

B.  Growth in GDP per Capita in France vs. the US:  Overall and the Bottom 90%

The graph at the top of this post shows GDP per capita from 1980 to 2012 for both the US and France.  The figures come from the Total Economy Database (TED database) of the Conference Board, and are expressed in terms of 2012 constant prices, in dollars, with the conversion from French currency to US dollars done in terms of Purchasing Power Parity (PPP) of 2005.  PPP exchange rates provide conversions based on the prices in two respective countries of some basket of goods.  They provide a measure of real living standards.  Conversions based on market exchange rates can be misleading as those rates will vary moment to moment based on financial market conditions, and also do not take into account the prices of goods which are not traded internationally.

Real GDP per capita (for the entire population) rose for both the US and France over this period, and by proportionately somewhat more in the US than in France.  These incomes are shown in the top two lines in the graph above, with the US in black and France in blue.  GDP per capita in France was 83% of the US value in 1980, and fell to 72% of the US by 2012.

But the story is quite different if one instead focuses on the bottom 90%.  The GDP per person of those in the bottom 90% of the US and in France are presented in the lower two lines of the graph above.  The figures were calculated using the distribution data provided in the World Top Incomes Database, assembled by Thomas Piketty, Emmanuel Saez, and others, applied to the GDP and population figures from the TED database.  The US distribution data extends to 2012, but the French data only reaches 2009 in what is available currently.

The Piketty – Saez distribution data is drawn from information provided in national income tax returns, and hence is based on incomes as defined for tax purposes in the respective countries.  Thus they are not strictly comparable across countries.  Nor is taxable income the same as GDP, even though GDP (sometimes referred to as National Income) reflects a broad concept of what constitutes income at a national level.  But for the moment (the direction of some adjustments will be discussed below), distributing GDP according to income shares of taxable income is a good starting point.

Based on this, incomes (as measured as a share of GDP, and then per person in the group) of the bottom 90% in France were 88% of the US level in 1980.  But this then grew to 98% of the US level by 2007, before backing off some in the downturn.  That is, the real income of the bottom 90%, expressed purely in GDP per person, rose in France over this period from substantially less than that for the US in 1980, to very close to the average US income of that group by 2007.  And since one is talking about 90% of the population, that is all those other than the well-off and rich, this is not an insignificant group.

C.  Most of the US Income Growth Went to the Top 10%

Figures on the growth of the different groups, and their distributional shares, show what happened:

France US
GDP per Capita, Rate of Growth, 1980-2007
  Overall 1.5% 2.0%
  Bottom 90% 1.4% 1.0%
Share of GDP, 1980
  Top 10% 31% 35%
  Bottom 90% 69% 65%
Share of GDP, 2007
  Top 10% 33% 50%
  Bottom 90% 67% 50%
Share of Increment of GDP Growth, 1980-2007
  Top 10% 36% 62%
  Bottom 90% 64% 38%

As noted before, overall GDP per capita grew at a faster average rate in the US than in France over this period:  2.0% annually in the US vs. 1.5% in France.  But for the bottom 90%, GDP per capita (for the group) grew at a rate of only 1.0% in the US while in France it grew at a rate of 1.4% per year.  The French rate for the bottom 90% was almost the same as the overall average rate for everyone there, while in the US the rate of income growth for the bottom 90% was only half as much as for the overall average.

Following from this, income shares did not vary much over the 1980 to 2007 period in France.  That is, all groups shared similarly in growth in France.  In contrast, the top 10% in the US enjoyed a disproportionate share of the income growth, leaving the bottom 90% behind.

In 1980 in France, the top 10% received 31% of the income generated in the economy and the bottom 90% received 69%.  With perfect equality, the top 10% would have had 10% and the bottom 90% would have had 90%, but there is no perfect equality.  The US distribution in 1980 was somewhat more unequal than in France, but not by much.  In 1980, the top 10% received 35% of national income, while the bottom 90% received 65%.

This then changed markedly after 1980.  Of the increment in GDP from growth over the 1980 to 2007 period, the top 10% received 36% in France (somewhat above their initial 31% share, but not by that much), while the bottom 90% received 64%.  The pattern in the US was almost exactly the reverse:  The top 10% in the US received fully 62% of the increment in GDP, while the bottom 90% received only 38%.  As a result of this disproportionate share of income growth, the top 10% in the US increased their overall share of national income from 35% in 1980 to 50% in 2007.  Distribution became far more unequal in the US over this period, while in France it did not.

The data continue to 2012 for the US, but the results are the same within roundoff.  That is, the top 10% received 62% again of the increment of GDP between 1980 and 2012 while the bottom 90% only received 38%.  For France the data continue to 2009, but again the results are the same as for 1980 to 2007, within roundoff.

With this deterioration in distribution, the bottom 90% in the US saw their income grow at only half the rate for the economy as a whole.  The top 10% received most (62%) of the growth in GDP over this period.  In France, in contrast, the bottom 90% received close to a proportionate share of the income growth.  For those who make up the first 90%, economic performance and improvement in outcomes were better in France than in the US.  Only the top 10% fared better in the US.

D.  Other Factors Affecting Living Standards:  Social Services and Leisure Time

In absolute terms, even with the faster growth of real incomes of the bottom 90% in France relative to the US over this period, the bottom 90% in France came close to but were still a bit below US income levels in 2007.  They reached 98% of US income levels in that year, and then fell back some (in relative terms) with the start of the 2008 downturn.

But the calculations discussed above were based on applying distributional shares from tax return data to GDP figures.  For income earning comparisons, this is reasonable.  But living standards includes more than cash earnings.  In particular, one should take into account the impact on living standards of social services and leisure time.

Social services include services provided by or through the government, which are distributed to the population either equally or with a higher share going to the poorer elements in society.  An example of a service distributed equally would be health care services.  In France government supported health care services (largely provided via private providers such as doctors and hospitals) are made available to the entire population.  Since individual health care needs are largely similar for all, one would expect that the bottom 90% would receive approximately 90% of the benefit from such services, while the top 10% would receive about 10%.  If anything, the poor might receive a higher share, as their health conditions will on average likely be worse (and might account for why they are poor).  For other social services, such as housing allowances or unemployment compensation, more than 90% will likely accrue to the bottom 90%.

Taking such services into account, the bottom 90% in France will be receiving more than the 67% share of income (in 2007) seen in tax return data.  How much more I cannot calculate as I do not have the data.  The direction of change would be the same in the US.  However, one would expect a much lower impact in the US than in France because social services provided by or through the government are much more limited in the US than in France.  While Medicare provides similar health care as one finds in France, Medicare in the US is limited to those over 65, while government supported health care in France goes to the entire population.  And the social safety net, focussed on the poor and middle classes, is much more limited in the US than in France.

In addition, economists recognize that GDP per capita is a only crude measure of living standards as it does not take into account how many hours each individual must work to obtain that income.  Your living standard is higher if you can earn the same income but work fewer hours as someone else to receive that income, as the remaining time can be spent on leisure.  And there is nothing irrational to choose to work 10% fewer hours a year, say, even though your annual income would then be 10% less.  The work / leisure tradeoff is a choice to be made.

GDP per capita may often be the best measure available due to lack of data on working hours, but for the US and France such data are available (and are provided in the TED database referred to previously).  One can then calculate GDP per hour of work instead of GDP per capita, both overall and (using the same distributional data as above) for the bottom 90%.  The resulting graph for 1980 to 2012 is as follows:

France vs US, 1980-2012, GDP per hour overall and of bottom 90% (Autosaved)

By this measure, overall GDP per hour of work in France was similar to that of the US in the 1990s, but somewhat less before and after.  Overall GDP per capita was always higher in the US over this full period (the top graph in this post), and by a substantial 20% (in 1980) to 38% (in 2012).  Yet GDP per hour worked never varied by so much, and indeed in some years was slightly higher in France than in the US.

But for the bottom 90%, income received per hour of work has been far better in France than in the US since 1983.  By 2007, GDP per hour worked was 30% higher in France than in the US for the bottom 90%.  This is not a small difference.  French workers are productive, and take part of their higher productivity per hour in more annual leisure time than their US counterparts do.

E.  Summary and Conclusions

The French economic record has been much criticized by conservative media and politicians in the US, with France seen as a stagnant, socialist, state.  Overall GDP per capita has indeed grown faster in recent decades in the US than in France, averaging 2.0% per annum in the US vs. a rate of 1.5% in France.  While such a difference in rates might appear to be small, it compounds over time.

But the picture is quite different if one focusses on the bottom 90%.  This is not a small segment of the population, but rather everyone from the poor up to all but the quite well off.  Growth in average real income of this group was substantially faster in France than in the US since 1980.  While overall growth was faster in the US than in France, most of this income growth went to the top 10% in the US, while the gains were shared more equally in France.

Furthermore, when one takes into account social services, which are more equally distributed than taxable income and which are much more important in France than in the US, as well as leisure time, the real living standards of the bottom 90% have not only grown faster in France, but have substantially surpassed that of the US.

For those other than those fortunate enough to be in the top 10%, living standards are now higher, and have improved by more in recent decades, in France than in the US.