France Labors at Folly

Article excerpt


We can always count on the French to show us how holding the wrong moral values and following the wrong economic policies will produce a comedie that becomes tres tragique.

Hundreds of thousands of students have been taking to the streets from Paris to Lyon demonstrating and rioting against a new labor law that will allow employers to dismiss without cause employees 26 years old or younger within the first two years of being hired. France has some of Europe's most stringent laws restricting the freedom of employers to manage their labor force. It's virtually impossible to get rid of workers who either aren't performing their jobs well or who employers simply can't afford to pay because demand drops for the goods and services produced by their enterprise. Not surprisingly, even when demand is high, employers will not hire costly workers because it would be extremely difficult to downsize if business is bad.

And costly they are. In France wages, labor rules and regulations are set by negotiations between the major unions, business groups and the government, that is, by corporatist collusion rather than voluntary contracts between employers and employees. The French government also mandates six weeks of paid vacation, lots of paid holidays and other benefits. Nice work if you can get it. The trouble is that 1 in 10 can't.

Not surprisingly, unemployment in France has averaged over 10 percent for the past 15 years, with the current rate at 9.6 percent. Private sector job creation has been almost non-existent. With France's population stagnant, you'd think the demand for labor would be high. By contrast, America's unemployment for the same period averaged just over 5 percent - the current rate is 4.8 percent - with 23 million net new jobs added to the economy - and this with the population jumping by 40 million. America is a job creation machine.

But are the French who actually do have jobs better off? Not really. Per capita gross domestic product in that country is $29,000 compared to nearly $40,000 in America.

The French government in the late 1990s decided on a bizarre strategy to combat unemployment. It mandated a cut in the work week to 35 hours but without a corresponding pay cut, on the theory that employers would need to take on more workers to make up for those lost hours of production. It became a crime to work too much. Government agents literally kept watch for people who might be putting in too much time on the job. Like criminals meeting in dark bars to plan crimes, honest individuals had to meet secretly to plan productive activities. …