The new French Prime Minister, Dominique de Villepin, has declared he will start to tackle France’s unemployment problem within his first 100 days in office. Joblessness, he told his compatriots, is the ”true French disease”.
That is self-evident, but De Villepin’s frankness shows that the recognition of the problem is becoming more and more widespread, especially since the French voted ”non” in the referendum on the European constitution, at least in part because of malcontent over unemployment.
For many years the French have looked down their Gallic noses at Britain’s ”Anglo-Saxon”, hire-and-fire, liberal market economy with what they saw, wrongly, as its McJobs — low living standards and long hours.
Indeed, De Villepin was careful in announcing some reforms to the labour market, which he hopes, wrongly, might reduce France’s army of jobless people, to emphasise that he was not abandoning France’s cherished ”social model” in favour of anything more ”liberal”.
Meanwhile, French newspapers, even left-leaning ones, are lining up to praise ”Le Blairisme” while the country’s Interior Minister and presi-dential hopeful, Nicolas Sarkozy, has declared that the French model is no longer the best.
He’s got that right. The figures show why. French unemployment is 10%, one in four young French people is out of a job. Small wonder, then, that so many young French people are working in the United Kingdom, and often in highly skilled, high value-added jobs. Employment in the UK is a record 75% of the workforce. In France it is 62%.
French average earnings (wages and salaries) have grown 2 to 2,5% a year over the past decade, roughly in line with inflation. That means people are not getting any richer in France. In Britain, by contrast, earnings have been growing by 4 to 4,5% for years, meaning a real-terms rise of more than 20% in less than a decade. That represents a big rise in wealth, the sort of rise the French were used to in earlier decades but are now having to forego. In short, the French social model is not making French people better off and is not offering them enough jobs.
None of this is to say that France is not a great country with beautiful countryside, fantastic infrastructure and many world-class companies. It is not for nothing that more than 60 000 British households have a second home in France. But the point is that growing prosperity means they can afford one. While France looks great on the surface, the economy is simply not working for its people.
This does not mean Britain is perfect, but at least strong economic growth is freeing up resources to pump into public services. The French health service has run out of money.
Nor is it the case that Britons are all working horribly long hours for low wages. Britain, like France, has a minimum wage, set at almost the same level. But more French people work for the minimum wage than British people do.
Working hours are interesting too. We have all heard of the French 35-hour week, while the French often think Britons all work more than 48 hours a week because of British Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown’s insistence on keeping the opt-out of the European Union’s working-time directive.
While it is true that about 20% of the British workforce work longer than 48 hours, the average full-time week is 37 hours, just above the French. It is simply not obvious that the British work a longer week than their cross-Channel neighbours.
And nor does the McJobs claim (that British jobs are all low-grade services jobs rather than ”proper” manufacturing jobs) stand up to scrutiny. As Arnaud Vaissié, a French CE working in London, points out, the size of the French manufacturing sector is slightly smaller than the British as a share of the economy.
Britain has an acknowledged problem with the quality of its education and skills levels, but it is not clear that France is a shining beacon. m ”Actually the average educational attainment in France and Britain is very similar,” says Raymond Torres, a labour market economist at the Paris-based Organisation for Economic Cooperation and Development.
In fact, Vaissié adds, the two economies are more striking for their similarities than their differences. The economies are a similar size, as are their populations. France, though, is more than twice as big as Britain. Interestingly, a similarly low proportion (less than 5%) of each country’s workforce is involved in agriculture.
Economic growth has also been fairly similar. Britain’s economy has grown by 17% since 1998 and France’s by 13%, though France has grown more slowly than Britain in the past couple of years.
What really sets the two apart are their labour markets. For France this is a real achilles heel, and one that is holding back an economy that could otherwise really sizzle. France’s keenness to provide protection for those in work and generous benefits for those out of work has suffered from the law of unintended consequences and sent unemployment up.
Firms faced with an equation in which the cost of employing people outweighs the benefits, particularly for the low-skilled, have invested in machines instead. Thus productivity, or output per worker, is much higher in France than Britain.
”In France, recruitment is the last resort. In Britain it is the first,” says Vaissié, who has set up a think tank to consider what France can learn from Britain. Flexibility in its labour market is the key, he concludes, but flexibility remains a dirty word in France.
Rod Mitchell, an English mortgage broker in the south of France, is seeking to expand his business but says taking on French workers is hazardous and costly. ”If I want to pay a part-time assistant â,¬1 400 a month gross, I would actually pay â,¬2 400 once all the social costs are added.” If the person turned out to be unsuitable, sacking would be difficult and expensive. ”So I haven’t done it.”
Professor Richard Layard of the London School of Economics says France needs to reform its labourmarket to encourage the unemployed back to work as quickly as possible, rather than paying them a lot to do nothing for a long time.
”Unemployment is one of the clearest sources of human misery that we know how to reduce. The key … is to mobilise the unemployed to fill emerging vacancies as quickly as possible,” he wrote in a recent paper. ”The longer you pay people for doing nothing, the longer they will do just that.”
In France it is quite possible to receive several thousand euros a month for quite some time after you lose your job. In Britain it is a few hundred pounds and that can be quickly withdrawn if you don’t accept one of the jobs on offer. Britain has one-stop job centres combining benefits payments with job searching and training. France has three different agencies doing those functions.
France has myriad labour market policies in place but spends more than five times as much as Britain on them, even though its unemployment is only twice as high. But the policies are misdirected and don’t coax people back into work.
Britain changed direction with its labour market policies in the late 1980s, with considerable success.
Getting more people into work doesn’t mean forcing people’s wages down and hours up. Indeed, high unemployment in France has had the effect of depressing pay.
It does involve regional flexibility of wages so that firms in different areas and industries can adjust their pay to local conditions. France is bizarre in that union membership is lowest in the industrial world, at 10% of the workforce, but union pay agreements are extended by law to cover 95% of all wage deals.
In Britain, 30% of workers are in unions and 30% of wage deals are set by agreements with unions. Torres and Layard say this is a significant rigidity, keeping joblessness high in France.
France does better than Britain in one area — disability benefit, although France has far fewer people on sick leave than Britain’s 2,7-million.
France’s labour market problems can be fixed, but De Villepin’s response is not promising. Putting up the minimum wage and increasing unemployment benefits are not the way forward. Nor is adding even more civil servants to an already bloated public sector, and paying for them by scrapping a planned tax cut. Much bolder action is required, but don’t bank on it happening soon.
De Villepin is a big fan of Napoleon. He may soon be reminded that his hero’s own 100-day campaign ended at Waterloo. — Â