Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
OK. I'll keep it short but it's densely-argued and I may end up missing a good deal, also there are graphs I can't post because my scanner's knackered, so bear with me. Comments in italics are mine.

The piece, titled Unemployment: what needs to be done, is entirely by Denis Clerc. The lead mentions the symbolic level of 10% unemployment which France has reached, despite slightly improved results elsewhere in the Eurozone.

The bad French figures for 2003 and 2004 happened this way: there was a surge of new jobs between 1997 and 2002, due to the law on the 35 hour working week, which obliged businesses to hire in return for employer contribution reductions and wage increase moderation. 2.06 million full-time jobs were created. But productivity gains over this five-year period were 3.5%, while total wages (wages + employer contributions) rose by 5%. Businesses therefore had a shortfall to make up.

This they did once the 35-hr transition period was over (and a new gov't created a more favourable environment for them to do so). They stopped hiring in 2003 (low-growth year) and intensified (ie invested in productivity-rich equipment, IT, etc, rather than extensifying by creating jobs) in 2004 (better-growth year). They also sat down hard on wage increases (real wages dropped very slightly). With the result that French businesses have now more than made up for the 35-hr shortfall, and saw considerably increased profits in 2004.

What now? (What is to be done? as someone asked)

On GDP growth, skies are grey. Gov't can't do much beyond tweaks here and there to improve purchasing power (increase earned income tax credit, in particular), and encourage investment (possible given increased company profits).

Bringing the euro down => increased export competivity (this has happened since the article was written).

Stimulate "job-rich" activities in the service sector. Particularly following the Scandinavian model of municipally-organized services (child-minding, looking after the elderly, etc), where employees have real, stable positions rather than the current French model of subsidizing unstable part-time employment (akin to old-fashioned domestic service).

Not a good idea to reduce payroll taxes on low wages -- this has been done a great deal over the years with the result that businesses tend to keep employees down in a low-wage trap.

The present gov't did away with a large number of subsidized job contracts, particularly for young people looking for their first job; these could usefully be reintroduced.

(Not much new in this second part, after all; basically an argument for more government intervention than Chirac's lot will go for).

I'll do the bit about Denmark next, it's quite interesting. And there's another piece from September 2004 that examines whether the shorter working week is responsible for low growth, which I'll summarize if you like.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Jun 23rd, 2005 at 07:13:01 AM EST

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