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March 22, 2006
French Economics
Quite Amazing.
But this is where the comparisons should end. Today's eruption is more
complex, its denouement more uncertain. Hot on the heels of the "non"
to the European constitution last spring and last November's riots, it
is clear that the current situation is the latest expression of the
growing revolt against the authoritarian market society France has
become and the elite that wishes to take the Thatcherite project
further.
France? Thatcherite? A market society?
Plenty of economists refute the government's claims. Michel Husson of
Paris's respected Institute of Economic and Social Research says:
"There is simply no available evidence to suggest that higher
flexibility translates itself into the net creation of long-term
employment."
No? That countries with greater flexibility in employment contracts have lower unemployment is not evidence? That those countries which have increased the flexibility of their employment contracts have had net creation of long-term employment is not evidence?
And we’re supposed to be in ever closer Union with these guys?
March 22, 2006 in Economics | Permalink
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Comments
that caught my eye too - the "no evidence" bit I mean. Assuming this Michel Husson knows his onions, I guess this means the low unemployment in, I dunno, Scandanavia (and Belarus?) and high unemployement in countries with lax labour regulations (erm, Thailand?) mean that there is no relationship between flexibility and employment. Must that be it?
Posted by: Luis Enrique | Mar 22, 2006 9:55:26 AM
An argument that include the statement, no overwhelming evidence, could be possible, as could be one that said it has not been proven. Such is the nature of these arguments.
But no evidence suggests that the other side does not even have an argument.
I guess it is time to dispense with the "Respected" adjective.
Posted by: EU Serf | Mar 22, 2006 11:09:33 AM
Try a different angle. Has anyone come across "explanations", plausible or otherwise, from critical commentators or the protestors in France accounting for the persistent, extraordinarily high youth (<25 years) unemployment rate there of 22%?
No one appears to be suggesting any robust explanation of why business in France is so cautious about offering additional permanent jobs to young people. I'm not exactly an unqualified admirer of De Villepin, as some may recall, but in this case, his proposed labour market reforms are on the correct tack.
For comparison, the latest comparative official unemployment stats for the EU as released 1 March 2006:
http://europa.eu.int/rapid/pressReleasesAction.do?reference=STAT/06/25&format=HTML&aged=0&language=EN&guiLanguage=en
For historic data on OECD standardised unemployment rates:
http://www.oecd.org/dataoecd/41/13/18595359.pdf
Posted by: Bob B | Mar 22, 2006 12:07:14 PM
There was a big OECD study on this and Husson is broadly right. Labour market structure does not have a significant effect on the overall level of unemployment. It has an effect on who is employed (young versus old) and the average length of time spent in unemployment, but the overall level of unemployment is determined, to within an error term, by interest rates.
According to the latest Eurostat press release, Denmark and the Netherlands had lower unemployment rates than the USA and they both have quite a lot of labour market regulation.
Posted by: dsquared | Mar 22, 2006 12:26:46 PM
Got a link, dsquared? I'm not doubting your word - after all, proof that our reality-skeptic host is wrong is never hard to come by - but I'd be interested to read it.
Posted by: ajay | Mar 22, 2006 4:15:19 PM
Try the OECD on Economic Survey of France 2005: Improving labour market performance:
http://www.oecd.org/document/56/0,2340,en_2649_201185_34992056_1_1_1_1,00.html
Or the text without the graphs here:
http://www.oecd.org/dataoecd/57/55/35006471.pdf
This OECD Policy Brief on France from June last year includes the following illuminating passages:
"Employment protection legislation (EPL) makes dismissing workers on standard employment contracts relatively difficult and expensive in France. For many firms, most of the time, this is probably a minor inconvenience. But it causes significant extra costs for firms in difficulty or facing fluctuating market conditions and over time it has contributed to an unwillingness to hire, especially in uncertain times. . . "
"The government should work to change the counterproductive approach of placing the major part of the burden of protecting workers against economic fluctuation on employers, by relaxing EPL on the standard contract. Having a number of different types of contract, each designed to allow some flexibility but heavily circumscribed in their application, makes for costly complexity. The current situation is paradoxical: despite substantial assistance to the unemployed and strong apparent employment protection, employees feel great uncertainty over their future. A number of recent independent reports, as well as reform experience from some other countries, suggest that it is possible to reform EPL without jeopardising adequate job security. One way to increase both flexibility and security of employment, while reducing the current complexity, would be to absorb the different contracts into a single standard contract with the degree of protection varying with length of service, while reinforcing measures to help the unemployed find new jobs. . .
"The relatively generous level of social benefits means, as mentioned earlier, that material incentives to take jobs at low pay can be quite small for an unemployed person. Therefore, to improve labour supply, eligibility conditions for unemployment benefits should be tightened up for those who do not actively seek work or refuse jobs offered to them too often."
In the case of France, it would seem that the OECD really does believe that the prevailing unemployment rate there is affected by national labour market institutions, hence the recommended policies in the the OECD's survey of the French economy last year.
Doubtless, interest rates also affect employment levels but then France as a member of the Eurozone has lost national monetary autonomy - the European Central Bank now controls the levers affecting market rates of interest across the whole Eurozone.
Posted by: Bob B | Mar 23, 2006 1:07:47 AM
