Learning from the French

Published 11:54 pm Thursday, October 2, 2008

France is a crucible of civil unrest that is unlikely to cool off soon. In fact, constant protests could ultimately bring down Prime Minister Dominique de Villepin, who believes his changes to the country’s burdensome labor policies will boost the anemic French economy and help create desperately needed jobs.

The fact is no matter who leads that nation, the core problem remains: France is not competitive because of high production costs, taxes and stifling labor laws.

In fact, the Swedish think tank, Timbro, reported in 2004 that if France were a state in the United States, it would be the fifth poorest ahead only of Mississippi, West Virginia, Arkansas and Montana.

France’s general unemployment rate is 9.6 percent. More than 20 percent of its youth between 18 and 26 are jobless, and among the country’s poor, primarily immigrants from north and west Africa, unemployment stands at 40 percent. To put that in perspective, during the height of the Great Depression in America, the unemployment rate was 25 percent.

At the same time, costs for workers in France are high. Fringe benefits, social security and health care are expensive, and since 2001, French workers are on a 35-hour a week work schedule with five weeks of vacation and 11 paid public holidays.

While most European countries cover citizens from cradle to grave with expensive social policies, the French go a step further in employment law by basically tying employers’ hands.

For example, under current French law, it’s virtually impossible for employers to fire permanent employees. In addition, employers are restricted to three specific types of employment contracts for short-term, mid-term and permanent employees, making it difficult to move quickly to respond to ever-changing market forces.

These government policies hit young people and immigrants the hardest. For example, France has a high mandated minimum wage ($6.79 per hour) and costly work rules that make it almost impossible to terminate someone who isn’t working out or grows lazy on the job. So, ironically, the laws and work rules intended to help young and unskilled workers actually harm them. The result? France is a powder keg ready to blow.

The “First Employment Contract” law is set to take affect in April. For the next two years, it allows employers to fire new workers under 26 years of age without cause. That policy is perceived to be an arrow directed at the heart of union job security.

This is the second time in six months that thousands of French police in riot gear have launched tear gas canisters to disperse crowds of protesters from Paris to Nantes.

Last October, Muslims living in the banlieues were fed up with their high unemployment and took to the streets torching cars. Those riots, which went on for weeks, were a prelude to today’s protests.

The lessons for elected officials in Washington are simple.

First, don’t hamstring employers with a morass of new burdensome and costly laws that stifle productivity. Ultimately, the best job security is allowing the private sector the flexibility to develop innovative products which in turn create spin-off jobs.

Second, give employers the option to hire, train and, when necessary, fire people. As cold as that may sound, without the ability to rapidly adjust to global competition, other jobs and the economy will slide into the same predicament that French leaders face today.

The French are learning that carving up an ever shrinking pool of jobs creates civil unrest by cutting off opportunity. France – and America – need to increase the size of the pie so everyone can have a slice.

Don Burnell is president of the Association of Washington Business.