Quite why, you might wonder, was a country with wonderful infrastructure, beautiful towns and countryside, world-class companies and highly productive workers, tearing itself apart again?
Over the past couple of weeks we’ve seen millions of French people — students, trade unionists and pretty much any other group you care to mention — protesting on the streets against a small change in labour laws.
The protests were bigger, though less violent, than last year’s riots in many of France’s poor suburbs, home to many of its immigrants, which sent TV pictures of burning cars beaming around the world.
The reason can be summed up in one word: jobs. It is a problem that has existed for two decades and one that France’s ruling elite, to its shame, has failed to do anything about. Mind you, given the scale of the protests whenever they do, maybe that is no surprise.
The protesters were angered by a law that aimed to introduce a ”first job contract” or CPE, which would make it easier for employers to fire a young worker within his or her first two years. The idea was to make employers less reluctant to hire young people. The protesters saw it as an increase in job insecurity. They were also unhappy at the way the Prime Minister, Dominique de Villepin, forced the law, which was scrapped last week, on to the statute books without any real -discussion.
His motivation was clear: to try and do something about France’s chronic youth unemployment, which is running at 23%, rising to 50% among the children of immigrants in the suburbs that burnt last year. Unemployment among the whole population is 9,2%, almost double the rate of Britain.
Employment levels are also very low in France, at 64% of the workforce, compared with a record high of 72% in Britain, on internationally standardised numbers.
Why is unemployment so high in France? There are a number of reasons, mostly related to rigidities in the labour market. Non-wage costs are very high, making people expensive to hire. Firing people is difficult and costly. This has made firms over the years more and more reluctant to take people on, preferring instead to hire more machines.
This is where the higher productivity of French workers compared with their British counterparts comes from. The French have 80% more capital employed for each worker than the British do. So in many ways high French productivity is the flipside of high unemployment. The French say it is right to have high protection for workers. The trouble with that, says labour market economist John Philpott, is that it leads to a classic ”insider-outsider” problem.
”There is lots of protection for prime working-age males but this tends to exclude other groups, particularly the young,” he says.
Once on the inside, which is where all the protesting youths want to be, jobs are very comfortable, with a 35-hour week and lots of computers and other capital to work with. These are typically the people who defend the French ”social model”, looking down on what they see as Britain and the United States’s ”Anglo-Saxon” model with its ”hire-and-fire” jobs market and long working hours. In fact, Britain’s average work week is 37 hours, according to the ONS, the government statistician — that is little different to France’s.
At the aggregate level, France’s model is simply not working. Unemployment is so high that it has depressed wage growth to well below British rates. A social model that provides neither jobs nor rising living standards is not easy to defend. Nor has the French economy grown as fast as Britain’s over the past decade allowing national income per head to slip behind Britain’s. Indeed, the French model has so excluded many young French people that they have crossed the channel in huge numbers in recent years, looking for work in an economy that has created 2,5-million jobs over the past decade. They have got good jobs and like living in London. The money is better too, they say. They may not have the same level of job security as back home but they have jobs, and that, they say, is what matters.
The French are valued workers in London. Many are highly qualified in maths and engineering and have easily found work in the City of London.
Thus they contribute to the British economy and pay taxes here rather than at home. It is unfortunate for France that its sclerotic labour market encourages its keen, educated young workers to go abroad in such numbers.
The flows of French coming to Britain each year outweigh those British people, mostly older or retired, going in the opposite direction. It seems there are as many, if not more, French people living in London than there are British in France. For anyone living in London, this will not come as a surprise. Nearly three-quarters of the 300 000 to 400 000 now estimated to be living here are in Greater London. And most are under 35.
It is reminiscent of a Thatcher minister’s advice to the unemployed in the 1980s — ”On your bike!” The modern equivalent would be ”On the Eurostar!”, except no one has had to urge these young French people to do it; they have made their own decision to come and look for work, and good for them. This is, after all, what the European Union is about.
It is strange, though, how the myth persists in France that the British economy is made up of low-paid, insecure, low-quality jobs. In fact, figures show that more French people work on the minimum wage than British people do. The two are set at broadly similar levels although a key difference is that the French do not have a lower rate for young workers, as we do.
Adair Turner, who has just completed a pensions review for the Blair government but was until recently head of its UK’s Low Pay Commission, says this has been crucial in keeping youth unemployment high in France.
Attempts to introduce a lower rate in the mid-1990s led to riots similar to those we saw seeing in France in recent weeks.
The French like to point out that their workers are more productive than the British, but this is not really an answer. There are plenty of -economies, especially the US, but also the Scandinavian countries, that have managed the dream combination of high employment and high productivity.
Realising this, British policy has been geared, now that full employment has been more or less achieved, to raising the productivity of the British workforce by raising spending on education and skills and other measures.
There is little sign of it yet, unfortunately, but you wouldn’t bet against it happening suddenly, rather as it did in the US in the mid-1990s.
France’s challenge, to boost employment, is a more difficult problem, especially given the mass opposition to the slightest change. It is depressing that the very people that De Villepin is trying to help were the ones protesting loudest.
Clearly he and his predecessors should have explained more clearly what was needed — and the French also need to wake up to what is going on — yet these are the politicians who are now trying to shut out foreign companies from takeovers in France, even though French companies are active in foreign markets, making the most of the opportunities globalisation offers them.
But it is not only the politicians who have an attitude problem. Two-thirds of French people in a recent poll said their ambition was to become a civil servant. And only a third of the population think the free market system is the best way for the world in the future, compared with two-thirds in most other countries, including Russia. These are disturbing facts and show that France’s problems will not be solved any time soon. — Â