The Employment Impact of Differences in Dmand and Production

employment in each of the European economies (except Spain). The increase would be between
just under 3% in Germany and the UK and 4.5% in France.

However, while product mix within final demand or consumption has very limited implications
for relative employment between the US and the European economies, other powerful insights
into the sources of employment growth emerge through the framework of the VIS sector.
Decomposing employment growth among changes in demand (level and mix), labour
productivity and structural change in inter-industry relations highlights the dynamic for each
country between the job-creating effects of demand growth and the job-destroying effects of
productivity growth. A systematic difference emerges between the US and the European
economies, with the high rate of employment growth in the US attributable to high demand
growth relative to productivity growth. The European economies, on the other hand, reveal a
different balance, with relatively lower demand growth and a bias towards more widespread
productivity gains. This dynamic offers a persuasive perspective on the US-EU employment gap.

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