Comment on the French Employment Law Riots-BECKER

The riots by students and union members against the new French labor law can be understood better if the law is placed in the context of the French labor market for the past couple of decades. France has had low rates of employment, and unemployment rates of about 10 per cent for the past fifteen years. Some economists outside of France have blamed this to a significant degree on its rigid labor market. I wrote an Op Ed piece in the early 1990's for Le Monde, the prominent left wing French newspaper, arguing that regulations which made it costly to hire and discharge workers, and high taxes on labor, helped to explain both the low employment and high unemployment. French politicians, the middle and upper classes, and for a while most of their economists (one French economist replied in Le Monde to my article) rejected this explanation. They claimed that the proposed remedies were too Anglo-Saxon, and that the bad labor market situation was temporary, perhaps due to insufficient aggregate demand for labor. As sluggish employment continued throughout that decade and into the 21st century not only in France but also in Germany, Italy, and Spain, European economists and some politicians began to change their views. They concluded that lower taxes on labor, greater flexibility in hiring and firing, and other changes were necessary to produce the growth in employment that had occurred in both Great Britain and the United States. Germany under the Social Democratic leadership of Gerhard Shroeder significantly shortened the duration of unemployment compensation, and introduced other incentives for workers to look for jobs and for companies to hire them. In France, however, the resistance to change has been greater, and the Socialists while they were in power even went backwards by introduced a 35 hours workweek that was supposed to spread a limited number of jobs among more workers. Instead, it appears to have reduced employment. The Conservatives under President Jacques Chirac and Prime Minister Dominique de VIllepin have been slightly better. They modified the 35-hours law, allowed a two-year probationary period for employees at firms with less than 20 employees, followed Spain by introducing short-term employment contracts, and made a few other changes. Unemployment of young persons in most countries tends to be about twice the overall unemployment rate, and so it is for France. Youth unemployment rate is about 22 per cent, and fewer than 30 per cent of French youth between ages 15-24 have jobs, which is half the rate in Great Britain. Unemployment rates of educated persons are generally much below those of the less educated, which explains why the low educated Muslim youth have unemployment rates well in excess of 30 per cent. In order to improve economic opportunities for young persons, the law that led to these riots extends the more generous employment rules for small firms to young workers. Under this new law (not yet in effect), workers under age 26 could be discharged within the first two years of their employment without employers having to give any cause. It might seem strange that these riots have been led by students and union members, groups that are well treated by the French system. University students are favored both because they pay only token tuition, and they have relatively good job prospects after they graduate. Nevertheless, among other acts, students occupied the Sorbonne for three days until they were forcibly evicted. Posner and I had indicated in our earlier discussion of the riots by young French Muslims that riots are not easy to predict by economic and social variables like unemployment, economic progress, or the degree of discrimination. Still, one line of analysis may explain the heavy participation of both university students and unionists in the current riots. Employment by small companies and of young workers constitutes only a fraction of total employment. Therefore, to make a large dent on the economy's performance, the greater flexibility given to small companies and for employment of young workers has to be followed by other laws that apply to all employees. These include much greater overall flexibility in hiring and firing, lower minimum wages, and reduced taxes on employment. Therefore, if this law is allowed to be implemented, it is likely to be followed by laws that reduce the employment advantages between the better educated and unionized "insiders" who have good pay and stable employment, and the less educated younger and immigrant workers who tend to be unemployed and have uncertain job tenure. This is why the conflict between employment insiders and employment outsiders can help explain why college students, who are future insiders, and unionists, who are current insiders, make up the bulk of those rioting. Since insiders make up a majority of all employees, it is not surprising that apparently most of the French people want the government to withdraw this law. Although this explanation might be accepted for union involvement in these protests, does it help understand the participation of students since university students all over the world feel a responsibility to protest and sometimes riot? But consider that students have not taken over the Sorbonne since the famous 1968 student riots that brought down the de Gaulle government. I agree that students like an occasional riot, but usually a cause celebre is needed to galvanize them into action. The new youth labor law was the catalyst this time. That the riots may help university graduates and other insiders by discouraging politicians from taking away some of their advantages is surely an important added bonus.

Comments

[Arun Khanna]

The problem is individual citizens in France don't grasp how the inefficiency of existing labor laws impacts them.

I suggest French government commission an independent economic study of how many new jobs are estimated to be created by more flexible labor laws (and how much extra tax revenues would be generated). Based on those findings the government should send 'pseudo hiring letters' to unemployed young French workers (randomly selected and equal to workers who could have been hired). The letters should state that the person could have been hired if the existing rigid labor market rules had been changed.

Similarly, each year 'pseudo tax refund' letters should be sent to taxpayers stating the amount of lower taxes the person would have paid if the existing rigid labor market rules had been changed.

[Dan C]

Reminds me of the book, Bless the beasts and children. One teenager character fears that all the good protest issues will be gone by the time he starts college. He will miss out on the energy, camaraderie, and girls that go with heartfelt demonstrations. The desire for a cause to give his life a meaning.

Labor markets in France need to be reformed, like political markets in Illinois need to be reformed, yet a majority in both markets cling to the belief that they have a vested interest that benefits them in the current system. In part, I suppose it is because neither group beliefs that the alternatives will improve their situation.

Look at school vouchers, I am surprised how many parents belief that vouchers may help the talented escape a poor school system but that vouchers will do little for the average child ñ children like their own.

Change is difficult, worse then anything but stagnation.

[sam vinson]

Perhaps some attention should be paid to the macroeconomic policies of Western Europe. Significantly lower taxes on the Reagan-Bush model would support less efficient employment practices. The Euro agreement makes that difficult because of the obsession with balanced budgets. It just might be that the lack of discipline in our fiscal system--or the democracy of it--raises income sufficiently that people do not rely on shortsighted decisions like guaranteed jobs to better themselves.

[Paco]

Dear Professor Becker:

It appears that the student riots in France are further empirical evidence (if any were needed) that people are self-seeking actors and that once an entitlement is granted by the state, it is very difficult for it to take it away.

[Tracy W]

I vaguely recall once reading an article in an economics journal that presented a model that argued that legally-set probation periods were bad for employment, as it created an incentive for employers to fire someone just before the probation period expired - even if that person was a good worker.

From vague memory, it turned out that under a plausible range of assumptions, the risk of them not turning out to be a good worker once they'd gotten tenure and the benefits of maintaing flexibility outweighted the benefit of keeping a worker who had shown themselves to be a good worker.

If this is the case, the Parisian students might indeed be being rational in a purely self-interested way. They are the most likely to get jobs, and they would lose from a loss in job security.

[Laurent]

Very interesting post, as usual.

Living very close to France and used to watch French TV I have the feeling that most people in France are against the new French employment law because ... most people are against this new law.

Is is why I feel it might be insightful to try to analyse the riots and strikes in France with the framework you developped with Kevin Murphy in your book "Social Economics".

[Brandon]

Paul Romer offers some interesting observations about youth unemployment in France -- http://econblog.aplia.com/2006/03/bringing-french-unemployment-picture.html

[Fat Mike]

I'm not insane, I'm not bummed out
I got no one to blame, nothing to change
I got no evil to fight

Obe thing's for sure, I'm all outta angst
society don't bother me
and there's something wrong with that

So I'm off to Pakistan, Learn the laws of Islam
Fundamemtalism, forget that rock-N-roll
No cigarettes, no drink, In fact
It's difficult to think about getting laid
When you don't even get to see her face
I'm not insane

I'm not insane, I'm not liquored
I got nothin' to do, Nothing to lose
I got no place to call home
One thing's for sure, I'm all outta angst
Society don't bother me, there's something wrong with that

Next stop Mongolia
Don't get to golf or bowl with ya
Thown out that handicap
No stepping out till spring, In fact it's
defficult to sing when it's 20 below
and that's during the day
I'm not insane

[thibault]

It would be interested to hear from a french student, in favour of this new law... Here i am...

The main problem in france is the lack of self-confidence, and the bad expectations everyone has because of the crap government, of the so so economic results...It freezes french economies, and french people are stuck thinking that what we had before was better, and therefore changes are mistakes...

First, i had a question? how come you have data on the employment of muslims in france, when these etnical surveys are forbidden in France? Is it an estimation? Who gave you these features?

Second, you 've forgotten two elements : credit markets, and housing markets.

And have you tried to look for some place to rent or any credits to help you start a family when you're 24? It is true taht some part of the population is riotting because changes, and liberal changes are considered like evil, and that french are somehow quite lazy and coward. Some others are riotting because they know taht this new contract won't help them to begin with life as "an adult" : and more precisely they will be excluded from the credit and housing markets (simple adverse-selection model when the principal is risk-averse).

But they might not think about what is the french economic situation nowadays... When there is no money in the wallet, work and earn some more to be able to feed the family... (The US sometimes forget this mere fact...)

Last question : Do you really believe that we can model and predict how french muslim students will be part of riots by economics ?

[Mike Wells]

The arguments Becker and Posner make are persuasive but the characterization of the demonstrations as "riots" is a big exaggeration. There are a few criminals in the crowd, but the vast majority of the people who take part are peaceful.

[Anonymous]

nice
مركز تحميل

[Anonymous]

thanks
بنت الزلفي

[Anonymous]

العاب
___
ÿ¥ÿßÿ™

[Anonymous]

ÿßÿ®ÿ±ÿßÿ¨
___
دليل

[Anonymous]

العاب
___
ÿ¥ÿßÿ™

[Anonymous]

Thank you, you always get to all new and used it
شات صوتي

[Anonymous]

UxqhEn

[Anonymous]

ÿØÿ±ÿØÿ¥ÿ©
___
صور

[Anonymous]

Greeting. For visions come not to polluted eyes.
I am from Liechtenstein and also am speaking English, tell me right I wrote the following sentence: "Cheap white bunk bedsby delma stewart."

With respect 8), Agnes.

[Anonymous]

Thank you, you always get to all new and used it
ÿ¥ÿßÿ™

دردشه

[Anonymous]

Very interesting site. Hope it will always be alive!

[Anonymous]

Excellent site. It was pleasant to me.

[Anonymous]

thanks to tell me that,i think thats so usefully----
tiffanys
links of london

[Anonymous]

a great post,thanks for shareing-----
ed hardy
tiffany uk

[Anonymous]

دردشة برق

دردشة الخليج