Europe also faces lower standard of living

In my article titled "Singapore faces lower standard of living", I had argued that the problem facing Singapore is the rising competition from China and India. With their cheap labour, many businesses are outsourcing their production and services there, which means fewer jobs available for countries like Singapore. And because the labour pool in these countries is so huge, this process will continue for a long time to come.

The only way for countries with more expensive workers to compete for jobs is to raise productivity or lower wages. However, there is only so much that productivity can be increased by. High tech, high value-added activities have been suggested as the way to go for rich countries. However, Chinese and Indian workers will catch up, and quickly. Rich countries will find it increasingly difficult to justify the high wages of their workers.

Europe appears to be still trying. And doing it the hard way at that.

According to a New York Times article on 7 July, Europeans are working longer hours in the face of global competition. In the German province of Bavaria, the workweek has been extended from 40 to 42. German Chancellor Gerhard Schroeder wants to extend federal work hours from 38.5 to 40. In Britain, more than a fifth of the labour force works longer than the European Union's limit of 48 hours a week, according to a 2002 study.

By working longer, Europe hopes to be able to keep incomes up. But of course, unless accompanied by more pay, more work also means a lower standard of living. More and more people in rich countries are beginning to realise that this may be their fate.