EU, Texas Economics: Language, Money, Mobility

The Wall Street Journal compares, of all things, EU economics to Texan ones:

"Arguably, the heart of the euro zone's problem isn't a matter of culture or governance or remaining barriers to trade in goods. Rather, it's the huge hurdle that has always existed: Europe's multiplicity of languages. The fact that few Greeks or Portuguese have enough German to take on professional or even semi-skilled jobs in Germany removes the sort of safety valve that properly integrated federations rely on.

A case in point is the Texan economic miracle, the subject of considerable debate in the U.S. right now. Texan politicians make strong claims for the state's performance relative to the rest of the U.S. during the recovery. Doubters point to the fact that Texan unemployment remains high.

But a close reading of the data by Matthias Shapiro on his Political Math blog highlights something very interesting. Texan unemployment belies the strength of the state's economy because it has had considerable population growth during the past couple of years. Texas's strong employment growth has inspired people to flock to the state—so much so that the actual proportion out of work hasn't come down as fast as it might have done otherwise.

Since the start of the recession in December 2007, Texas's labor force has grown by 6%, astonishingly quickly for such a large state—more than twice as fast as the next-fastest state. When people are hit by hard economic times in one part of the U.S., they pack their bags and move to where the jobs are. The same doesn't happen in Europe.

For instance, the economically active population in Germany, Europe's economic powerhouse, has shrunk by about half a percentage point during the same time Texas has boomed. This is why Germany's unemployment rate has fallen much faster than that of Texas even as unemployment remains at stratospheric levels in countries like Spain.

Even in the years before the financial crisis, immigration to Germany from other European Union countries was equivalent to only about 0.4% of Germany's population, and most of that in the form of cheap labor from neighboring Poland.

Because it's harder for people from poorer euro-zone countries to move to the core, where there are jobs, fiscal transfers are crucial to address imbalances between the economies. But there's currently very little scope for these in Europe. EU spending as a percentage of GDP is less than a tenth of the U.S. federal government's.