The Employment Impact of Differences in Dmand and Production

between 6 and 10%, except in Spain where it would reduce it by around 7%. It is the mix of
Services within US consumption which is particularly employment-friendly, with a further
positive, but smaller contribution coming from the Services share in US consumption.

See Table 10

See Figure 9

Again, in order to convert the growth rates of employment generated by consumption into
growth of total employment we adjust these changes by the share of total employment
attributable to consumption (UK 48%, Germany 44%, France 46%, Netherlands 29%, and Spain
52%; the respective employment to population ratios are: 0.71, 0.65, 0.59, 0.60, and 0.48). The
employment to population ratio rises by 2.1 percentage points in the UK, 1.8 in Germany, 2.6 in
France, and 1.8 in Netherlands, while in Spain it is reduced by 1.8 percentage points. Thus,
everything else constant, if European economies were to adopt a US-type consumption mix the
UK could halve its (small) employment gap with the US, France and Germany could reduce
theirs by one-fifth, the Netherlands would reduce its gap marginally, while the gap between the
US and Spain would widen.

We conclude this Section by emphasising the contrasting messages about the implications for
European as against US employment deriving from the analysis of the final demand mix on the
one hand and the consumption mix on the other. The consumption mix in Germany and France
can be seen as contributing a minor but nonetheless noticeable part of their employment gap
with the US - one-quarter or one-fifth, depending on the direction of the counter-factual; the
same applies in a much more modest way to the UK and the Netherlands, while the reverse
holds in Spain. On the other hand, the final demand mix in the European economies is
unambiguously employment-enhancing. Since consumption contributes a significant part of the
employment generated by final demand a focus on the employment effects of consumption alone
on the employment gap does not seem appropriate. We therefore turn now to considering the
issue from a wider perspective.

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