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You are quite close to the truth of the matter. Free markets aren't the problem, the fact that they're often not really free is.
Yep. We have a pretty catastrophic situation here in Finland because of unions that have been made too powerful by legislation. I'll happily grant that they've done a lot of good work in Finland in the past, but really nothing positive in the last 4 decades at least. It has grown stale like most powerful things do when they're let to linger without any accountability for too long.
I suppose you have a choice then. Let corporations run amok and sacrifice your well-being for profit as they do in the US, or in your case let unions take over and give people better lives at the expense of bureaucracy.
I prefer something in the middle after spending time in Europe and the US. EU quality of life is higher, as is upward mobility, longevity, and a bunch of other factors. FBFW that comes at the price of strong unions that make a lot of things difficult to do thanks to the bureaucracy.
I don’t think you really want truly free market. The first thing to be sacrificed is you for more profits.
This is a classic example of a false dichotomy. These are not the actual real-life options on offer.
It's possible that quality of life thing derives from politics, but it's also possible that it's happening for some other reasons. Also, you might not have the correct view of quality of life when it comes to EU vs USA. The problem is that USA is often depicted as a single entity which is compared to individual European countries. But really, it would make more sense to compare the entirety of EU to USA, or individual EU states vs individual US states.
But if you do compare it like that, it doesn't look great for EU:
We have Scandinavia (where I live) and Switzerland. Scandinavia is grounded in capitalist free market economy, with varying levels of freedom and government intervention. Switzerland, of course, is one of the most free market/capitalist countries in the world -- also often one of the happiest ones.
That doesn't seem to happen in a free market, at least when competition is healthy. Companies are competing against each other in terms of employees and their product, which practically guarantees optimal outcomes for both.