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Emerging common wisdom: Villepin reform flawed + my counter proposal

by Jerome a Paris Mon Mar 27th, 2006 at 10:51:49 AM EST

While the New York Times has a silly editorial lambasting France's "privileged students", the Financial Times, through the editorial voice of Wolfgang Munchau, is moving towards a new stage of conventional wisdom which I find interesting.

As a serious instrument of economic reform, Mr de Villepin’s CPE is too one-sided. Its net economic effect may well be negative, if you take into account the loss of economic output from tomorrow’s strike, and other disruptions caused by the recent mass demonstrations. This is bad economics and bad politics. Mr de Villepin is not a tragic hero who is sacrificing his political career for the greater good. He is simply a politician who bungled one of the biggest reforms in modern French politics.
Some of the protesters' arguments are finally heard and given credence, but this is used to argument that the reform was actually insufficicient.

Bumped up...

Just for fun, let's blast the NYT, quickly:

France's Misguided Protesters

For the second time in four months, French streets are filled with riot police, tear gas and rampaging youths.

Still that focus on the isolated and irrelevant acts of violence, which have very little to do with the protests. The NYT makes it sound as if violence is the only form of protest, which is absolutely misleading.

This time, privileged university students have been protesting what they see as an assault on the job security that they consider their birthright. But the labor reform to which they are so opposed is much needed and was proposed by Prime Minister Dominique de Villepin as a partial answer to those who rioted in the suburbs.

Again, major untruths: the university students are not "privileged". They are middle class, and not part of the privileged few that go to Grandes Ecoles. They do not have a "birthright" to lifetime employment - nobody does in France, at least in the private sector, like in all other countries. It is possible to fire people with cause. The suburb youth are just as hostile to the law: they are likely to be their first victims, as it makes discrimination even easier.

Unemployment is at 22.2 percent among the young and close to 40 percent in the poor suburbs, compared with 9.6 percent nationwide.

False - it's at 22% among the active young, not amongst the overall population of young people. The way this sentence is written, it's not just sloppy writing, it's factually wrong.

Mr. de Villepin['s] law is a reasonable attempt to remedy a serious problem, and the reaction of the students and unions is out of line.

Why is the reaction "out of line"? What does that even mean? They should not be able to express themselves?

And that's coming from the "liberal media". Sigh...

But anyway, on to the more interesting Munchau article:

Wolfgang Munchau: De Villepin’s labours

The students are winning the political battle against Dominique de Villepin, the French prime minister, over his labour contract for young people, known as CPE. At first sight, the travails of Mr de Villepin fit a depressing pattern of Europe’s chronic inability to reform. The prime minister is portrayed in the media as an idealistic political leader who tried to do the right thing, but failed. In the same vein, the young protesters on the streets of Paris look as though they stand in the way of France’s transition to the 21st century.

This narrative is as widespread as it is false.

Yes!! Yes!

  • It's a narrative, an essential point to acknowledge;

  • it's false, also a major admission

As far as I know there exists no reputable academic foundation for Mr de Villepin’s specific proposal – a work contract that removes employment protection for the young, while leaving it fully in place for the old. There is some consensus in the labour market literature that excessive employment protection can lead to high unemployment among certain groups, including the young. But this consensus does not imply the selective removal of employment protection for a single age group. I would suspect that most labour market economists would be on the side of the students in this conflict.

Facts are on our side! (As usual, one could say)

French youth unemployment is among the highest in the western world. It has oscillated between 20 and 30 per cent since the mid-1980s and is now at the lower end of this band, but with no signs of a futher decline. Tito Boeri of Bocconi University in Milan and Pietro Garibaldi at the University of Turin argue* that Mr de Villepin’s CPE accentuates the intergenerational conflict between labour market insiders and outsiders. They conclude that for as long as this conflict persists, there will be no genuine labour market reform.

It would be nice to see Munchau acknowledge the fact that the youth unemployment is skewed (I repeat myself, I know, but this is an essential point), by the fact that the active young population is very small in France, thus making the unemployment rate (the ratio of the number of unemployed to the active population) high despite the fact that the ratio of unemployed to the overall youth population is not markedly different than in other countries (right column below).

But his point about the existence of a conflict between insiders and outsiders, and one between generations is true.

He then goes on to discuss Olivier Blanchard, an eocnomist at MIT who recently wrote a paper on economic theories of unemployment (European Unemployment: The Evolution of Facts and Ideas, pdf), which concludes that economists basically don't know what causes unemployment (or not) in European countries, as the empirical experience is contradictory.

(As a side note, the Blanchard study notes that

The labor market is characterized by large flows—high rates of separations from firms, and high rates of hires by firms. In France for example, 1.5% of all jobs are destroyed each month and roughly as many are created— interestingly, this is about the same percentage as in the United States. As there are many reasons other than job destruction why a worker may separate from a firm, the flows of workers are typically much higher. In France, they are of the order of 4% per month (Pierre Cahuc and André Zylberberg 2004).

This should put to rest the notions that the current French labor market is not flexible... One can dream)

back to Munchau)

The two-tier labour market in France is the result of a panoply of employment contracts – a standard contract that offers an absurdly high level of employment protection and various other types that offer little to none. Mr de Villepin’s CPE is the latest addition to the range. It has no time limit, offers no protection at all during the first two years, and full protection thereafter.

While I would disagree with the description of the existing contract as "absurdly protective", he has a point in that the problem is the difference between that contract and the others, less protected ones, and that the CPE only adds to an already long list of precarious work contracts, which French companies use and abuse with entrain these days.

The trouble occurs at the crossover point – for example, when people try to move from a fixed-term contract to a permanent one. Employers have no incentives to offer their employees a permanent contractual employment guarantee. This is why many present fixed-term contracts end in unemployment, rather than permanent work.

The same problem also applies to Mr de Villepin’s CPE. Whereas previously employers failed to turn fixed-term contracts into permanent ones, they will in future simply dismiss young employees at the end of the two-year trial period.

And that's the basic complaint of the protesters. Logical, sensible and reality-based.

Sadly, Wolfgang Munchau comes to the wrong conclusion:

Instead of inventing yet another type of employment contract, Mr de Villepin should have reformed the employment protection for existing labour agreements. That would have had some effect on employers’ incentives to take on young people after a trial period. Under Mr de Villepin’s CPE, young people start their careers in a US-style hire-and-fire labour environment for two years, after which they will either enjoy protection for life, or become unemployed. This is absurd.

Any serious reformer of the French labour market would also at least have to address other factors that might contribute to high structural unemployment, such as the 35-hour week and the minimum wage, also known in France as SMIC, which is presently set at €8.03 per hour. According to the Organisation for Economic Co-operation and Development, 13 per cent of French workers were paid the minimum wage. It represents about 60 per cent of the median production worker’s wage. These data suggest that the SMIC may have been set too high.

Despite quoting the Blanchard study, Munchau still comes back with the tired arguments that it's all the fault of the 35-hour week and the minimum wage.

The minimum wage does not seem to be an issue in Ireland or the UK, despite being at similarly extravagant levels (and having increased less in France than in the UK in the past 10 years), so that must not be it.

The 35-hour week was applied in a period which saw the biggest net creation of jobs in France ever; and ever since it's been weakened by Chirac's various governments since 2002, the job creation performance has been much weaker. There may be no link, but it's equally hard to blame the 35-hour week for the lack of job creation...

Munchau is at least coherent, in that he focuses on the right problem, i.e. the existence of this two-tier system, and his solution - weaken protections for everybody, makes sense and is, in a way, fair (in being harsh on all workers equally).

The problem is that it does not work. The solution to job creation is not to create more precarity, which will only be abused, in the current context, by corporations. It is to create of new mood of confidence and optimism in the economy that allows to bring the young into the system first.

Bring them back onboard, and then slowly nudge things toward more flexibility. There has to be a positive incentive. We've seen the results of negative incentives in the past 25 years: people get increasingly apathetic, resentful, hostile to politicians - and rightly so. They are only promised pain, with no perspective of any improvement. The way out must be up, not down.

So I'll push again for a new "emplois jeunes" programme - a massive jobs programme for the youth, focusing on the practical resolution of the very real social problems of the country in the cités and schools. Make it long enough to get young people time to put their life on track (5 years sounds reasonable), focus it on the youth from the banlieues and the immigration who need it most, and make them work on things that actually improve their neighborhoods, and the chances for their younger brothers and sisters to get forward in life.

Then, maybe, possibly it may make sense to nudge the long term work contracts into something a bit more flexible than the existing version.

This needs to be fleshed out and argumented further, but I think it holds promise - and it worked under Jospin.

In the meantime, let's simply enjoy Munchau's conclusion, again

As a serious instrument of economic reform, Mr de Villepin’s CPE is too one-sided. Its net economic effect may well be negative, if you take into account the loss of economic output from tomorrow’s strike, and other disruptions caused by the recent mass demonstrations. This is bad economics and bad politics. Mr de Villepin is not a tragic hero who is sacrificing his political career for the greater good. He is simply a politician who bungled one of the biggest reforms in modern French politics.

Display:
Emerging common wisdom: Villepin reform flawed + my counter proposal | 125 comments (125 topical, 0 editorial, 0 hidden)
Re: Emerging common wisdom: (4.00 / 2)
waiting for conventional wisdom to catch up...

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Mon Mar 27th, 2006 at 06:42:13 AM EST
Re: Emerging common wisdom: (none / 1)
Can I call you Bob van Winkle?


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 06:49:20 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
That describes me in many way...<heh>, that's funny!

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Mon Mar 27th, 2006 at 11:43:59 AM EST
[ Parent ]
Re: Emerging common wisdom (4.00 / 3)
Great.

So, taken with the story from last week, let's recast this: France should take Gordon Brown's lead by relying on public employment programmes to bring the young and the disadvantaged into the work force and thus solve the unemployment problem. There's a story the FT can run with. Great Britain leading the way for the backward continent again.

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 07:01:00 AM EST
Re: Emerging common wisdom (4.00 / 2)
I'd be happy to give the credit to Great Britain on this one - if they are willing to take it!!

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 07:09:14 AM EST
[ Parent ]
Re: Emerging common wisdom (4.00 / 2)
I'm only half joking. I half believe that the English language media would be more likely to like the plan if it was phrased that way.
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 07:14:51 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
I know and I agree. I'll try to send a note to Munchau.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 07:49:37 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
You know what? It might be worth trying to write up an op-ed along those lines, to see it they will bite. Sort of like the Sokal hoak.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:15:07 AM EST
[ Parent ]
a discordant note (none / 1)
I am a little bit "sur ma faim" reading your counter-proposals....
Tackling youth unemployment has been an issue for 20 years now, and all we've managed to come up were piecemeal remedies. The French left was not the last to blame, first Mitterrand and his 39 hours week, not specifically focused on the youth though, which was claimed to create jobs ... with hindsight, I am LOL at the mere mention of it.
To speak seriously, what we miss in France is true credibility on the part of the socio-democrats (the left) and practical ability to come up with meaningful proposals.
There is no effective counterweight to the current government's measures.

Coming back to your comment :

possibly it may make sense to nudge the long term work contracts into something a bit more flexible than the existing version.

  1. to be constructive : Why not we at ET come up with a "Energize employment" blueprint ?
  2. to be more critical : I am afraid I cannot be along the same lines as you, unless you further your argument : what do you understand by "a bit more flexible"? My view is that your perception is not accurate : the problem are not contractual provisions, the problem is the general climate of suspicion between employers and potential employees.
Employees are generally perceived as a cost, not to say a liability, in France.
At the risk of putting things in a very sketchy way, I'll say why : because someone who earns 50 K€ in France costs 100 K€ to the employer. In the UK, the same cost would turn into a 90 K€ earning. CQFD


When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:23:40 AM EST
Re: a discordant note (none / 0)
Umph. Can you break that down for me?
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 07:37:55 AM EST
[ Parent ]
Re: a discordant note (none / 0)
I mean the employee costs. I'll ask Sam to do the same for Ireland when I see exactly what you mean.
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 07:39:09 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Understand a French payslip is a sheer nightmare. I have mine here so I'll try.
The company cashes out "charges patronales" which stands for all employer's contributions to the social security system. That encompasses contributions for the retirement, health and jobseekers allowance sections of Sécu .
For a 60€ net income I cash in, my employers cashes out 40€.  

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:51:16 AM EST
[ Parent ]
Re: a discordant note (none / 0)
For a 60€ net income I cash in, my employers cashes out 40€.
Are you including income tax deductions in the 40€?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:53:11 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Unfortunately not. The 60€ are before tax.
And the beauty of the French system is that unless you are married and have at least 3 kids, an average 3 month net salary amount goes out yearly to the Income tax collection office.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:55:19 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Sorry, I misunderstood your question. My employer does not benefit from any tax deductions out of hiring me. I am not "emploi jeunes" <s>

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:56:53 AM EST
[ Parent ]
Re: a discordant note (none / 0)
No, you understood my question perfectly, and you should have said "for each 60€ gross", except that in that case you don't cash them in, do you?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:59:18 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Correct.  Well in a sense I cash them in, but I have to cash out 33% of it the following year.
In France, the taxation system is not on a cash basis, so you get a cash outflow in 2006 on your 2005 earnings.
The UK "direct debit" system is less painful.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:24:47 AM EST
[ Parent ]
Re: a discordant note (none / 0)
In Spain and in the US you have an estimate of income tax deducted from your salary, too. I don't know why it's not done in France, too.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:32:30 AM EST
[ Parent ]
Re: you subversive individual (none / 0)
You're hinting at a reform of the French administration ? Vade retro satanas ! <s>

A project to merge the tax calculation and the tax perception services faced harsh opposition a few years ago. Indeed, you send your declaration paperwork and receive a notification of how much you owe from one administration, but the check has to be sent to another administration.
If the latter mislay your post (which often happens) or worse, forget to debit your account, you receive a letter from the former notifying a penalty payment. And have to prove it's not your fault that their fellow civil servants did wrong. Delightful ...

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:30:37 AM EST
[ Parent ]
Re: you subversive individual (none / 0)
Isn't there such a thing as registered mail with acknowledgement of receipt in France?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 09:32:51 AM EST
[ Parent ]
Re: you subversive individual (none / 1)
True, that is what rescued me when they sent me my tax bill for year 2005 while I had had no revenues in France during that period! Then wonder why the French tax administration is commonly perceived as an incompetent blood-sucking entity.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:46:43 AM EST
[ Parent ]
Re: administrative reform (none / 0)
To be fair, businesses in France, which already collect social contributions, are hostile to the idea of adding to their workload by also being income tax collectors. It's not just the administration.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 10:00:28 AM EST
[ Parent ]
Re: a discordant note (none / 0)
I was meaning net of employee's social contributions. What we call net salary here in France is the gross salary minus all the Sécu contributions which on employees side are also quite a heavy burden : in the 15-20% of gross salary range.
 

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:30:38 AM EST
[ Parent ]
Re: a discordant note (none / 0)
You actually get the net salary paid into your bank account?
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:31:16 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Correct.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:31:52 AM EST
[ Parent ]
Re: a discordant note (none / 0)
And then the tax is paid the next year. That's no fun.
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:34:40 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Well, when your income does not vary much year on year, you can opt for a monthly debit on your account.
The amount is set on the basis of the past year's taxation, and can be adjusted downwards (keep you fingers crossed to get the money back) or upwards in the light of your present year earnings. This is less painful, but difficult to implement when a part of your salary is variable (the comp&ben package we were mentioning the other day).

However, nothing compares to the beauty of a US tax declaration... You have to pay someone to do it for you to avoid burning out too many synaptic connections.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 08:41:06 AM EST
[ Parent ]
Re: a discordant note (4.00 / 3)
The Irish tax system can be fun as well. I elected to marry an accountant, so I really don't have to worry about it any more!
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:46:30 AM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
I hope we won't have to see Sam sobbing "he married me for my calculator" ;-)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:54:18 AM EST
[ Parent ]
Re: a discordant note (4.00 / 4)
She only married me because I iron, so there's a symmetry there...
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:58:41 AM EST
[ Parent ]
Re: a discordant note (4.00 / 6)
Hmmm...and he cooks, bakes, grooms my horse and chauffeurs me around.  What more could I ask for...impart a bit of accounts & tax knowledge for all that...a fair swap!!

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde
by Sam on Mon Mar 27th, 2006 at 09:12:53 AM EST
[ Parent ]
Re: a discordant note (none / 0)
It's the general rule in France. Cheques are used exceptionally. Cash is off-limits.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:52:37 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Oops, that was re: salary drafted direct to bank.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:54:30 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Cash is off-limits because it leaves no audit trail, obviously.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 10:02:03 AM EST
[ Parent ]
Re: a discordant note (none / 0)
For a gross salary of 100
  • the employee pays 20 in employee social security charges (out of the 100)
  • the employer pays 40 in employer social security charges (in addition to the 100)

Out of the 80, you pay income tax, which for median income levels will be around 10-15% depending on familiy situation. Despite my higher than average income, I paid only about 5% in net taxes last year, thanks to having 3 kids and legal deductions for the person we hire (legally) to clean the house and kindergarten fees. A single worker is likely to pay more than that, but I'd be surprised if the average tax rate (as opposed to the marginal one) were above 20% on an investment banker's income.

So out of 140 paid out, I get to keep 75. A 50% burden is about right, altogether.


In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 08:06:28 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Well, I can tell you the marginal one (ie mine) will be around 33% in 2006. Which by the way will be lower than what it used to be in the UK.
20% is indecently low ! :)
I must start and collect info on the PACS....

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:22:06 AM EST
[ Parent ]
Re: a discordant note (none / 0)
I was specifically writing about the average rate, not the marginal one, Agnès. I am pretty certain that your net average tax rate is lower than 20%.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 08:43:53 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Maybe I am missing the difference. I am pretty sure than 3 months of my salary will go to the Trésor public, so what level of average taxation does that leave me with ?

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:32:34 AM EST
[ Parent ]
The result from the Dublin jury. (none / 0)
Sam says:

Gross 100k
No credits for kids - that's covered by child benefit payments

PAYE Tax - 23490
PRSI - 2932

Net - 73,578
Employer - both cases add 10,750 to gross salary
Normal (but not obligatory) employer pension contrib. of c. 5% gross salary = 5375

So a total cost of 116K at that level, with a take home similar to your number above. Much less social services though, and you'd be paying a fortune in childcare costs before age 5. The employer's pension contribution would probably be higher than 5% at those wage levels as well, depending on age and contractual considerations.

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 08:45:38 AM EST
[ Parent ]
Re: The result from the Dublin jury. (none / 1)
...and that assumes that the person receiving the 100k is the person getting all the tax credits etc.  In reality if the spouse is not working the 100k earner will pay an additional €5k in PAYE tax.
If the spouse is working they can earn up to €23k gross at a 20% tax rate.  That €23k cannot be passed to the 100k earner if the full €23k is not utilised.

(now I'd better get back to work!!)

We are all in the gutter, but some of us are looking at the stars. Oscar Wilde

by Sam on Mon Mar 27th, 2006 at 09:04:55 AM EST
[ Parent ]
not obligatory (none / 0)
In France, too, a number of contributions paid by the employer are not obligatory: extra pension schemes, top-up medical insurance, etc. They are seen as perks going with the job, and increase the higher up the scale you are.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:07:46 AM EST
[ Parent ]
For a gross salary (none / 0)
For a gross salary etc

You're right to look at the gross, not the net as Agnes did. But the numbers you give concern salaries above a certain level (about 130% of minimum wage). Beneath that level, employers get "relief" on social contributions, so they are less than 40%. On the minimum wage itself, I don't know the figure offhand, but the payroll contributions are not that high.

These cuts on low-salary payroll contributions were brought in gradually over the years to encourage hiring of unskilled workers. In the end, they produce a "perverse" or unintended effect of encouraging employers to keep as many employees as possible down in that low-contribution zone. (A "low-wages trap"). This is the main reason (imho) why the percentage of minimum-salary earners is high, as Munchau points out.

BTW, I think the median salary in France is about 130% of minimum salary, so we'd be talking about half the employee population in this lower-payroll contribution bracket.

The other thing I'd like to point out about what Agnes says is that the social contributions are deferred salary (health, pensions, unemployment insurance, etc). The true wages that correspond to the post you hold = the mass of your gross pay + employer contributions.

Personally, I think it would help the employment situation to bring employer contributions down, but paying for solidarity would have to be shifted elsewhere, on to income tax or a parallel tax most likely. Also the question would necessarily come up: who gets the money from the cut: the employer alone, the employee alone, or a share-out between the employer and the employee's salary?

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:02:53 AM EST
[ Parent ]
Re: For a gross salary (none / 0)
One of the things they have done here is to reform things to mostly avoid the particular poverty trap where an increase in gross wages led to a decrease in take home pay through perversity.

The payroll contributions drop off quickly here as well. You'd pay very little income tax or social contributions on a minimum wage employee.

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 09:13:41 AM EST
[ Parent ]
Re: For a gross salary (none / 0)
That's what needs to be done in France, and not only on the low wage employee category.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:41:46 AM EST
[ Parent ]
Re: contrasted reaction (none / 0)
I fully agree on the low contribution zone issue as well as on the fact that employer's contributions should be lowered.  
However, I am afraid I cannot share your view that social contributions are deferred salary.
The retirement section  by all means is not, as you will reckon being familiar with the French pension system. The health insurance either. Considering the basic 60% reimbursement rate for medical care basic expenses, I would prefer to contribute to a different system.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:39:13 AM EST
[ Parent ]
Re: contrasted reaction (none / 0)
So you are in favour of lowering social solidarity contributions and not replacing them with anything but your own choice of private supplier? Meaning that public health and pensions schemes disappear?
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:47:39 AM EST
[ Parent ]
Re: contrasted reaction (none / 0)
I am in favor of a contribution that will guarantee a 100% refund rate to the less affluent, and for that I am happy to pay. Not for a system where almost everyone (except those covered by the CMU) end ups with a 60% refund despite costly contributions.
As for myself, I am more than happy to continue paying for my own private health insurance.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:58:30 AM EST
[ Parent ]
Re: contrasted reaction (none / 0)
Isn't top-up health insurance (mutuelle) included in the payroll contributions you mention? Meaning, yours and your employer's? Or does your job come without that, and you have to pay for personal top-up insurance?

(If my questions are indiscreet, don't give indiscreet answers ;))

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 10:08:53 AM EST
[ Parent ]
Re: contrasted reaction (none / 0)
It is, it mean the top-up is included, not your question is indiscreet :)
What I would favour is a more re-distribution oriented health contribution system, were the contribution need would be based on  a 100% refund for those who cannot afford a top-up mutuelle, and 0 refund for those who contribute to a top-up scheme altogether. I am sure we would end up with a lower blended contribution rate.

What is specific to the French banking system is that the top-up mutuelle is optional (which is good)in some of the banks, while in others joining the in-house top up scheme is a CP of your employment, irrespective of the salary you earn.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 10:27:15 AM EST
[ Parent ]
Re: contrasted reaction (none / 0)
On your second point, I'm not sure, but I think it's general (ie not only banking) that an in-house scheme is either optional or compulsory depending on the deal the employer has negotiated with the insurer; if it's a "whole-house" deal (with subsequent savings for the employer), it is legally binding on all employees, you can't opt out of it. If not, you can, but it costs more.

On the first, that would be a big change you're suggesting. I don't know how well it would work. An example is Medicaid in the States, but there are numerous problems there, particularly with low-wage earners who are not "poor" enough to qualify but don't get a scheme with their jobs, and aren't rich enough to fund their own.

But essentially, you seem to me to think that a private system (bar a kind of Medicaid) would be more efficient than the public health service à la française. Where do you think that public service goes wrong?

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 10:42:29 AM EST
[ Parent ]
Re: French health care system (none / 0)
I have posted a couple of diaries end last year on the topic.
Health care in France : following the UK example

French health care reform : undermining the Government security net

That was the result of a research work I did for my former employer, the idea being to explain to a US board how the French health care system worked and why it was being reformed and so on.
I could set myself a target of making an update diary focused on answering your question.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 27th, 2006 at 10:54:24 AM EST
[ Parent ]
Re: French health care system (none / 0)
Please do, there are large debates on the UK NHS at the moment, which might provide useful crossover.
by Metatone (metatone [a|t] gmail (dot) com) on Mon Mar 27th, 2006 at 03:44:31 PM EST
[ Parent ]
Re: French health care system (none / 0)
I will do it one of these days, when I'm back here for real. The reasons that made me quit still hold.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 03:58:41 PM EST
[ Parent ]
Re: French health care system (none / 0)
Do they extend to answering email? ;)
by Metatone (metatone [a|t] gmail (dot) com) on Mon Mar 27th, 2006 at 04:02:43 PM EST
[ Parent ]
Re: French health care system (none / 0)
I think you've had the answer to your question by now ;)

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 04:26:54 PM EST
[ Parent ]
a share-out.... (none / 0)
 ... would be conducive to increased employment rate and decreased expatriation rate.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:43:17 AM EST
[ Parent ]
Re: a discordant note (none / 0)
And the 60K gross before income tax works out as about 70K cost to employer and 43K net of income tax and so on to the employee.
by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 09:08:39 AM EST
[ Parent ]
Re: a discordant note (none / 1)

The whole "French growth is stagnant" meme is applicable only to the period 2001-2003, coincidentally the period when the UK got its largest oil windfall - AND a huge housng bubble.

Let's see what happens now that North Sea production is collapsing, and that interest rates have gone up.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 07:48:12 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Now that I know you all French élite bloggers come from a math-heavy prep background, these exchanges acquire a whole other meaning. </snark>

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:50:33 AM EST
[ Parent ]
Re: a discordant note (none / 0)
I dunnot come from a heavy math environment !! And there is nothing I hate more than graph proliferation. Two of them are fine, but 10 is definitely too much ;)
And I owe you a croissant aux amandes :)

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:53:37 AM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
And I owe you a croissant aux amandes :)

And glad we are that you do!

by Colman (colman at eurotrib.com) on Mon Mar 27th, 2006 at 07:55:16 AM EST
[ Parent ]
Re: a discordant note (none / 0)
I know, I was going to claim my prize on the Grandes Écoles thread, but refrained... I now understand I missed the bit where it was not so much casually dropped as implied that prépa HEC was not math heavy...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:57:50 AM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
well, it is definitely math heavy, but you can still make it into one of the top three Business Grandes Ecoles with a 2/20 score in maths (writing and oral exam)...
Hush, don't tell my boss, I am in the finance business. But as I spent only 4 months (January to end April) in prépa, I had to make choices, so I never opened a maths book. It was heart-breaking by the way. ;)

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:03:11 AM EST
[ Parent ]
Re: a discordant note (4.00 / 3)
Sorry I'm only passing through (came to help my mom do some gardening today), so no time for me to structure my comments, just raw info for whoever wants: in HEC we have 13 hours a week (out of 40) of math lessons, and maths represent an average 33% of coefficients at exams => thus maths are still pretty heavy in HEC!
by Alex in Toulouse on Mon Mar 27th, 2006 at 08:03:52 AM EST
[ Parent ]
Re: a discordant note (none / 1)
ps: In HEC prepa we do 1/3rd "analysis" (double integrals and that kind of stuff), 1/3rd "algebra" (topology, rings and all that kind of stuff), and 1/3rd "probability & statistics" ... which means that there is a good probability, statistically speaking, that we analyse graphs using algebra and get nowhere.
by Alex in Toulouse on Mon Mar 27th, 2006 at 08:01:27 AM EST
[ Parent ]
Re: a discordant note (none / 0)
you mean you did :)
I do no understand a single word of what you wrote !

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:04:03 AM EST
[ Parent ]
Re: a discordant note (none / 0)
The divide, the divide...

Nothing to understand, Agnes, he's just name-dropping. </snark>

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:05:43 AM EST
[ Parent ]
Re: a discordant note (none / 0)
You mean equation-dropping ...;)

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:11:51 AM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
Please stop bragging, it's unseemly. Not everybody is as talented as you.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 08:07:34 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Yeah, some of us actually have to do the high math to understand things.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:09:34 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Ah but I think I get it, you must have done the "HEC économique" and not the "HEC scientifique", no, Agnès? (there are 2 types)

The "scientifique" one, contrary to what its braggard name suggests, does not involve any red dials or machines that go blip blip blip, but it's more math-oriented.

by Alex in Toulouse on Mon Mar 27th, 2006 at 08:26:13 AM EST
[ Parent ]
Re: a discordant note (4.00 / 3)
Ok my mom's back from shopping, got to get back at the garden. See you all later.

And viva la desconstruccion del NYT!

by Alex in Toulouse on Mon Mar 27th, 2006 at 08:28:39 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Nope, I did the HEC voie générale, as opposed to économique, so the coeffs were as you say.
Now I'll stop bragging about my swaying scores in the other subjects ; )

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:43:14 AM EST
[ Parent ]
Re: a discordant note (none / 1)
Don't make me pull a Bienaymé-Tchebychev inequality on you :))
by Alex in Toulouse on Mon Mar 27th, 2006 at 08:08:14 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Oh-la-la, the Chebycheff inequalities...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:08:51 AM EST
[ Parent ]
Re: a discordant note (none / 0)
It was always my favourite name in HEC maths (because I could never forget it).
by Alex in Toulouse on Mon Mar 27th, 2006 at 08:10:32 AM EST
[ Parent ]
Re: a discordant note (none / 0)
And what about the Chebycheff polynomials? Tasty, too!

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:11:29 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Bah, I was always only interested in inequalities.
by Alex in Toulouse on Mon Mar 27th, 2006 at 08:13:13 AM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
Heathen.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:15:14 AM EST
[ Parent ]
Re: a discordant note (none / 1)
The only law I am familiar with is Black Scholles. Not be mistaken for Black&Decker...

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:15:09 AM EST
[ Parent ]
Re: a discordant note (none / 0)
That's not a law, it's a model.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:15:40 AM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
That's true, but you know in equity trading you learn not to bother with accuracy in words, only with accurate 7 digit amounts.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:17:55 AM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
Let me pick up the change when you buy Migeru's croissant aux amandes.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:16:06 AM EST
[ Parent ]
Re: a discordant note (none / 0)
You want the cost of that rounded to the nearest million?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 09:28:35 AM EST
[ Parent ]
Re: a discordant note (none / 0)
Where do you expect to find such an expensive croissant aux amandes ?? :)

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:48:51 AM EST
[ Parent ]
Re: a discordant note (none / 0)
At the Metatone bakery of course, proubdly ripping off bankers since, oh, 10 mins or so ago... ;)
by Metatone (metatone [a|t] gmail (dot) com) on Mon Mar 27th, 2006 at 03:46:57 PM EST
[ Parent ]
Re: a discordant note (4.00 / 2)
Now that was nice thread hijack.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 08:46:21 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
it worked under Jospin

Out of curiosity, and for ET record purposes do we have figures to support your assertion ?

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:28:29 AM EST
Re: Emerging common wisdom: (4.00 / 2)
Of course:

France created 2 million new jobs in just over 3 years in 1998-2001, the period when both the 35 hour week and the emplois jeunes were in place.


In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 07:33:56 AM EST
[ Parent ]
For the avoidance of doubt (none / 1)
your graphs are great. Only two curves.
Beyond that, I am lost.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:58:39 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
This definitely goes against the CW, and I appreciate that.  Perhaps this question has been raised elswhere, and perhaps it's simplistic too, but I was wondering if the 35 heures also suffers from the insider-outsider syndrome. Does it?  

It seems that it has been applied haphazardly and created a lot of resentment, resentment which overshadows any and all benefits it may give.

by andrethegiant on Mon Mar 27th, 2006 at 08:26:38 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 1)
I found some links earlier, but have lost them right now, but surveys show that most people see the 35 hour week as a positive thing (broadly, 50% favorable, 33% indifferent, 15% hostile, with somewhat more hostility amongst blue collar workers - who lost some pay on extra hours - and women - who sometimes lost out on more "flexible" work times).

Do remember that it was not really aplied in the private sector nor in small companies. Big companies took advantage of the 35-hour week (which were really counted on a yearly basis, actually giving them more flexibility) to reorganise work practices and actually boosted productivity. For instance Peugeot ended up with a 115% capacity use for its factories after putting it in place, thanks to its ability to put in more shifts (people working, on a volunteer basis, 30 hours mostly over the week-end, for instance)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 09:12:45 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 1)
it was not really aplied in the private sector nor in small companies

Don't you mean "public" sector?

As for small companies, it depends. Very small companies didn't apply it because it just couldn't work out with only 2-3-4 employees. But from the 10-20-employee (and above) level, it was widely applied.

Some women may have lost out from flexible hours, others gained: especially those who were on part time and moved up to full time. Employment increased in that way too, not only by creation of new posts.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:28:28 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
Yes, public sector, of course!
I thought the limit for SMEs was 20 employees but maybe my memory fails me here.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 09:30:59 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
My memory may fail me too, but I think it was optional lower than 20. There were advantages to opting (rebates on social contributions, wage-increase moderation over several years, and, above all, new flexibility in organizing the workload thanks to the annualization of working hours), so companies did opt if it looked like being in their interest.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:38:49 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
Well, in terms of "mythical" man-hours you can swap 7 employees at 40h for 8 employees at 35h, so it's antural that it wouldn't be applied for less than 10 employees.

Jerome also commented the other day that there are legal obligation regarding worker representation, etc, beyond 10 employees, which sort of defines what is "small". That threshold might also be a factor.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 09:31:47 AM EST
[ Parent ]
Re: Emerging common wisdom: (4.00 / 2)
10 is one threshold, 20 is the next, 50 the next.

So it certainly entered into the calculation if you were under 10 or 20 and would go over that limit by opting to implement the law.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:42:21 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
Another tidbit:


entre 1997 et 2001, deux millions d'emplois ont été créés en France et le nombre d'heures salariées est passé 21,1 à 25,9 milliards

Not only jobs were created, but the total number of hours worked actually increased more.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 08:19:12 AM EST
[ Parent ]
Re: Emerging common wisdom: (none / 0)
Odd source ...
However, I stick to my opinion that big companies were not the sector which profited most of the 35 hour system. And where do young grads apply for a first job ? Mostly to medium sized and big companies.
I remain skeptical about the job creation virtue of the 35-hour week.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 09:54:48 AM EST
[ Parent ]
Re: another discordant note (none / 0)
Sorry, but I have yet another question re your comment below :
The 35-hour week was applied in a period which saw the biggest net creation of jobs in France ever; and ever since it's been weakened by Chirac's various governments since 2002, the job creation performance has been much weaker. There may be no link, but it's equally hard to blame the 35-hour week for the lack of job creation...

In writing that "eversince it's been weakened by Chirac's various governments since 2002, the job creation has been much weaker", you make clear this is a causal relationship. Then you write "there may be no link" which is odd.
It would be really interesting to have more material on the actual impact of the 35-hour week on the job creation. Indeed, as I mentioned, the 39-hour week put in place by Mitterrand had a ludicrously small impact on job creation.

  1. the 35 hour week did certainly work in small to medium size companies, and in specific business sectors. This certainly was not the case in big companies or for positions requiring very acute skills or specific expertise, on tasks where you cannot just split a workload in two. What happened is that the same workload had to be executed over a reduced timescale, because of the 35-hour week regulations imposed on the companies, thus putting staff under extreme pressure, especially experts and middle-management.

  2.  the effect of work time reduction cannot be properly assessed without being put into perspective with company creation figures, overall economic growth, etc.  
Now that would be really interesting, but the task rests with you. Me just popping out of lurkedom to help out.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 07:44:57 AM EST
Re: another discordant note (none / 0)
I interpret this
eversince it's been weakened by Chirac's various governments since 2002, the job creation has been much weaker
as pointing out a correlation, and this
there may be no link
as hedging his bets by pointing out that "correlation is not causation".

I think it would be better if Jerome came out and actually argued that there is causation, because then we'd have a falsifiable hypothesis, but he's being a politician. </snark>

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 07:48:34 AM EST
[ Parent ]
Re: another discordant note (none / 0)
and good he is writing as one at last ! We all wondered when he would come clear on that :)

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:06:14 AM EST
[ Parent ]
Re: another discordant note (none / 1)
Try www.google.com
Type "rapport créations emplois 35 heures"
Press "chercher"

Find this: http://www.legrandsoir.info/article.php3?id_article=1722

Extract this quote:


Oui, la RTT a créé des emplois : 350 000 selon la DARES, 400 000 selon la CDC, 500 000 selon l'IRES.

Go to www.google.com
Type "35 heures DARES"

Find this great site with lots of links: http://hussonet.free.fr/35h.htm

Open this one in particular: http://hussonet.free.fr/35asken.pdf (pdf)

Extract this:


Abstract: This text gives an analytical review of the first main estimations of the impacts of the Aubry's law on employment in France. Both macro and micro approaches seem to converge to about 300 000 net job creations in the short-term, mainly in pioneer firms ("Aubry I" firms). However, because these first movers have made the choice to anticipate the legal commitment, these estimations can be affected by an auto-selection bias. The latter have not been yet robustly corrected. Further researches are thus required to confirm positive impacts of shorter working time on employment.

As one would say: pas besoin d'avoir fait Polytechnique...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 27th, 2006 at 07:59:36 AM EST
[ Parent ]
Re: another discordant note (4.00 / 2)
pas besoin d'avoir fait Polytechnique...
So that's how you say "It's not rocket science" in French ;-)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 27th, 2006 at 08:00:26 AM EST
[ Parent ]
Re: another discordant note (none / 1)
Indeed !
But you know I am really lazy Jérôme, plus while at the office, I am expected to be working right now (as many of us), so thank you for extracting that for me.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 27th, 2006 at 08:08:36 AM EST
[ Parent ]
Re: another discordant note (none / 1)
Exactement.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Mar 27th, 2006 at 09:32:36 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
The NYT editorial is so empty I am tempted to throw in a little thought. First I confess I know nothing about the French economy, so take it easy please.

As has been (probably) pointed out, the high level of youth unemployment seems to imply (i) a mis-match of job offerings and job demands at the entry level, and (ii) a slow adjustment process to resolve the mis-match in the labor market.  de Villepin is trying to eliminate the initial mis-match by creating a sub-category of "youth job" opportunities.  But it does not appear to address the slow adjustment process, and, consequently, one wonders what happens after 2 years when the sub-category jobs are no longer available. It may simply postpone the mis-match by 2 years (as Munchau says). (If, however, employers and young employees have the chance to know each other and thus smoothen out the adjustment during the 2 years, the proposal makes sense. Intuitively, however, this seems unlikely to happen.)

I think Jerome is right; in order to address the slow adjustment process, some sort of flexibility needs to be introduced in the full-time employment practice, a potentially explosive issue for de Villepin (seems to me).  Additionally, I wonder, if young entrants into the labor market would have to be better represented before employers. (We try to resolve this problem by greater, organized participation of colleges in the job search and follow-up for their students.)

I will become a patissier, God willing.

by tuasfait on Mon Mar 27th, 2006 at 10:58:42 PM EST
Re: Emerging common wisdom (none / 0)
Jerome, I have been reading your posts about the CPE, and I admit that many of the facts and figures you provide are slowly weaning me off the kool-aid and turning me back to jus de cassis.

In particular, I was surprised to see that much data supporting the positive effects on growth and jobs that the Jospin 5-year "emplois jeunes" plans and the 35-year work week may have had in the 1999-2003 period (e.g. the OECD graphs in French employment and unemployment, the graph in Private sector job growth, your tidbit, the statistics you cited from Couvrat's article, and these two graphs, which like Agnes, I appreciated for their succinctness. ;-)  )

Having said that, I am far less persuaded by one point/figure you keep on bringing up, namely that

the active young population is very small in France, thus making the unemployment rate (the ratio of the number of unemployed to the active population) high despite the fact that the ratio of unemployed to the overall youth population is not markedly different than in other countries (right column below).

which you support must emphatically with the figures in Less than 8% of French youth unemployed!.

I may be missing something fundamental here, but arguing that things are not that bad for young French people because only 8% of them are unemployed, when 60% of them are in school, does not reassure me that the situation is not bad.

On the contrary, I think the relevant figure is not the 8% proportion de jeunes au chomage, but rather the 22.6% unemployment rate.  And the reason is, if I am finishing my studies in France and I am under 25, it wouldn't really make me feel better to know that only 1 out of 5 of my peers (i.e. young people who want to work now) actually has a job.  As far as I am concerned, the 60% of my age group that are still in school are irrelevant.  In fact, it would be very easy to reason that the reason so many young people are in school (I assume even after 22 years old), is that they are pessimistic about being able to find a job (though I am totally open to being corrected on this point.)

At any rate, I looked at the numbers for the U.S in 2005.  The percentage of active youth in the U.S. is 66.2%, versus 34.5% in France.  Furthermore, the unemployment rate among active youth under 25 years of age in the U.S. was 11.3%, exactly half of the percentage in France.  These figures indicate pretty starkly to me two things:

(1) A larger of those that want to work actually can find work.

(2) And a larger percentage of young people choose to work earlier in the U.S. than in France

Is it not reasonable to suspect that perhaps (2) is true because of (1)?

Let me repeat that I find much, if not most of the other points you make about the French system (of which I know very little) quite persuasive.  But this point has been a stickler for me every time you repeated it, and finally I just had to bring it up!

Thanks,
Ken

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire

by marco on Mon Mar 27th, 2006 at 11:22:41 PM EST
Re: Emerging common wisdom (none / 0)
It is dangerous to take United States employment data at face value.  Anecdotally the definition of "employment" is to be considered.  As unemployment figures are easily and regularly jiggered by US politicians it is helpful to  check for the more culturally meaningful statistic of "underemployment" wherin an individual is working for very low wages and generally for a low number of hours.  This is also defined as a skilled and/or educated worker employed out of their area of skill or level of education (Economics phd's managing McDonalds, for example).

This matter of underemployment expects to be greater in the US than it is in France due to the solid French social protection network and solidarity.  In the United States one must take any kind of paying-work the moment one's "unemployment insurance" finishes it's course.  US unemployment pays in the ballpark range of 40-60% of active net wages for a period of 6-9 months at most post-termination, and is only available to those who have been fired "without cause."

The figures for "unemployment" in the US are based on the percentage of people actually collecting these payments with zero effort to quantify the percentages of people who collect payment in full and leave the rolls, to US figures they are treated the same as one who has attained employment again.

In reality these people move from "unemployment" to "underemployment"  This is necessary for survival, food, housing, health care, all things not covered by United States society for the unemployed.  Naturally low-paying, minimum-wage and generally part-time jobs in the US (formerly "McJobs," now more apt to be Waljobs or Starbucks) do not provide any kind of measurable benefits such as health insurance.  

It is also a trap for the average worker.  Dismissed from gainful, health-insured, full-time employment an American worker signs up to collect unemployment insurance (which they have paid into) while searching for another full-time position.  If times are tough that position will not be found and unemployment insurance runs out.  At this time the worker must accept whatever sources of income are immediately available and then enters an "underemployment" scenario with hopes of delaying inevitable bankruptcy and starvation a bit longer while hoping for "things to turn around" and gainful employment to once again present itself.

The worker in this scenario slaves away at often difficult, tiring and depressing work for practically zero pay, generally racking up excessive debt at high interest rates in order to maintain a bare standard of living.  During this time the worker is not generally enrolled in job-training, school or even able to devote much time to the pursuit of better employment.

This treadmill is REALITY in the current US employment market and it is appaling that anyone would take seriously the prospect of unleashing it upon their own culture.  There are simply no upsides.

by paving on Tue Mar 28th, 2006 at 02:24:40 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
I'm afraid that your analysis of the statistics is flawed: this diary goes through it in some detail.

In fact the Bureau of Labour Statistics does measure the number of "discouraged" workers and lots of other things: the U-6 number here includes underutilised labour. It's at 9% or so.

The BLS national figures for unemployment are not based on the numbers collecting unemployment insurance. At the state level that might be true.

by Colman (colman at eurotrib.com) on Tue Mar 28th, 2006 at 08:21:07 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
I am certain those numbers are absolute bollocks.
by paving on Tue Mar 28th, 2006 at 12:33:09 PM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
A cursory google search of "flawed BLS methodology" with an additional tag of "unemployment" can greatly assist your research into the matter.

Taking US Govt. statistics at any kind of face value is a bit like taking Nazi Party statistics on Jewry at face value.  

Perhaps the easiest to breakdown demonstration of statistics in the USA is the Nielson television ratings.    A fundamentally manufactured statistic that is incredibly wrong and consistently leads to "incorrect" decisions based on objective data is the accepted standard because THOSE IN POWER TO MAKE THESE DECISIONS HAVE AGREED TO ACCEPT ITS BIAS.

This is a mechanism of control, a method of manufacturing consent and a basic tool of propaganda.  

by paving on Tue Mar 28th, 2006 at 12:40:58 PM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
Let me state that the 22% unemployment rate is real enough, and an issue that needs to be solved. And more generally the lowish employment rate in France (mainly from the lower rates for the old and the young) is surely something that could use reform.

But what's not clear to me yet is how serious the low employment rate of the young is. Is it just because they are studying and do not need to work while studying, because it's free? Or is it that they are studying long than they'd want because they cannot find work?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Mar 28th, 2006 at 02:34:00 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
if I am finishing my studies in France and I am under 25

Let's see ... if the 25-35 years old unemployment rate in France is 9-10%, but the 15-24 unemployment rate is 23%, then this doesn't necessarily mean that there is a major problem that's twice as worse than in the US.

It can just as well mean that people 15-24 who look for a job and can't find one are most probably those that didn't study long enough, the under-qualified. ie. And in a French system where studying is very important, and where 2/3rds of your peers are studying, if you quit your studies too early you'll go pump up that youth unemployment figure. How about this interpretation? Yeah, could work.

We can have all the interpretations in the world ... but it stands that Jérôme's repeat argument is about methodology. If all European countries use the entire age group as the denominator, then France should be doing as much. And if by doing that France obtains a rate comparable to other European countries, but still twice less than the US one, then to me it doesn't mean that France has a problem, particularly when we're told to look at the UK for a model to follow.

What it could mean however is that the US has a problem ... kids don't study enough there, and end up in under-qualified jobs with no benefits or protection => that could be construed as a major problem.
ie. not that (2) is true because of (1), but (2) is true because of (3): "studying late is harder in the US than in France, and finding a cheap job with no protection or benefits is easier in the US than in France". How about that interpretation. Yeah, could work too.

What I'm basically trying to say is that is that there is nothing in the world that can indicate that the 22% figure is good, or bad. No reason to suspect it either. Hell it can even bowl down to some people just being choosy ... who knows. The point is that Jérôme's argument is about methodology, not about interpretation of numbers.

by Alex in Toulouse on Tue Mar 28th, 2006 at 03:10:57 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
Here's a bunch of comparable figures from the UK. Real unemployment rate (based on active population), including the 16-24 age group, per ethnic group. I think France's stats would look quite the same for the 16-24 group if they were available. (11% for white youths, 37% for Bangladeshi youths ...).

Source: http://www.statistics.gov.uk/STATBASE/ssdataset.asp?vlnk=6282

by Alex in Toulouse on Tue Mar 28th, 2006 at 03:28:39 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
Point taken that Jérôme is making an argument about methodology.

Paving's point also taken that U.S. youth employment numbers probably include many "underemployed" people; it would be interesting to know just what proportion of the total those McJobs constitute.  (I regret, I could not understand very well your statement that, The figures for "unemployment" in the US are based on the percentage of people actually collecting these payments with zero effort to quantify the percentages of people who collect payment in full and leave the rolls, to US figures they are treated the same as one who has attained employment again.)

Also, I agree with Alex that it is quite possible that (2) is true because of (3): "studying late is harder in the US than in France, and finding a cheap job with no protection or benefits is easier in the US than in France".

Nevertheless, as much as I would like to believe otherwise, it seems that France's youth employment lags not only significantly behind that of the U.S., but also that of the U.K., as well as the average of the EU15, if I correctly interpreted the following graph (based on EuroStat, which I admit I don't know anything about):

Is this because EuroStat is in fact using a different denominator for its U.K. and other EU15 numbers (i.e. all, not just active, youth)?  Or is it because there are far more young people working McJobs in the U.K., and other EU15 countries, than in France, bringing up employment numbers by counting underemployement jobs?

If neither of the above is the case, then is there is any other reason why  the unemployment rate among active youth in the U.K. is nearly half of what it is in France?

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire

by marco on Tue Mar 28th, 2006 at 06:41:11 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
That graph above looks like the graph for the unemployment rate, i.e. unemployed to active youth population.

It says nothing about employment.

The number in your graph is the ratio of the number on the right column (unemployment to total population) to the sum of the numbers on the left and the right column (employment to total population + unemployment to total population = active population to total population)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Mar 28th, 2006 at 07:37:22 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
Ah, they do indeed look roughly to be the same numbers, at least for France and the UK.  Thanks for pointing that out.

I'm not sure I understand your second point, though:  It says nothing about employment.

I am probably missing something very basic here, but does it not say that the active youth employment rate in U.K. is 88% while in France it is 78%?

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire

by marco on Tue Mar 28th, 2006 at 08:00:22 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
It says nothing about employment means that you're missing the information that 55% of UK youth v. 30% of Franch youth are actually employed.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Mar 28th, 2006 at 08:04:54 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
Got it.  Thanks.

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire
by marco on Tue Mar 28th, 2006 at 08:09:51 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
I take a less sanguine view of these data [fraction combining work and study]

than both you and Jerome. From what I know about Spain and Denmark, the staggering difference (1.3% v. 62.5%) does not come from the fact that Danish youth need to work to pay for their studies, but that it is socially accepted, encouraged, and the job market supports it. In Spain you'd be hard pressed to find an employer (and a school) with schedules allowing a student to work to pay for their education, or to be able to afford moving out of their parents' home.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Mar 28th, 2006 at 07:01:54 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
I mean, when Jerome says
As Pfaff points out, one of the reasons for this is that French students have less of a need to work while they are studying:
I have to disagree. I did not need to work while I studied, but in that I think I was somewhat privileged. What is the situation like in France for the banlieu youth? Are they forced out of higher education because of the need to work, and then find themselves against the 22% (active) youth unemployment?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Mar 28th, 2006 at 07:23:41 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
It is dangerous to take United States employment data at face value.

It may also be dangerous to take French employment data at face value as well.  I asked a French friend of mine what she thought about the CPE debate and the comparative employment numbers among youth in various countries.  Her reply was:

Vrais chômeurs, faux étudiants...
On pourrait aussi ajouter aux jeunes chômeurs inscrits à l'ANPE ceux qui ne
le sont pas :
1) Parce qu'ils n'ont jamais travaillé et donc n'ont pas droit aux
allocations-chômage
2) Parce qu'ils s'inscrivent pour la 5e fois en 2e année de Deug de psycho
parce qu'ils savent qu'ils ne trouveront pas de travail.
Je pense qu'on obtiendrait un total supérieur bien supérieur aux 22% (ou
30%) officiels !

[Roughly:]
Fake students, but actually unemployed...
You could also add to the number of unemployed youth who are registered at the ANPE [Agence nationale pour l'emploi (I am guessing that would be France's equivalent to the U.S. Department of Labor)] those who are not registered because:

  1. they have never worked before and so are not eligible for unemployment benefits
  2. they reenroll for the 5th time in the second year psychology because they know that they won't find any work (I guess "Deug" is some mainstream college level track, though I am not sure... I should read up on that "Grandes Ecoles" thread).
I think you would come up with a total that is much higher than the official 22% (or 30%)!

I don't know if 1) is true, and even if it were, would it add many more people to the number of unemployed?  Perhaps those are part of the "Autres inactifs (ni scolarisés, ni inscrits a l'ANPE)" in the graph from Jerome's post.

But what's not clear to me yet is how serious the low employment rate of the young is. Is it just because they are studying and do not need to work while studying, because it's free? Or is it that they are studying long than they'd want because they cannot find work?

My friend's second point indicates that it is not altogether unrealistic that a significant number of French youths do indeed stay in school simply because they are so pessimistic about their job prospects.  (Incidentally, is it really true that you can keep enrolling over and over in school, at no extra cost, even after you have done so far more than the average?  Do you have to intentionally fail your courses in order to be reaccepted?  I wonder if she is not talking about an extremely small percentage of students.)

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire

by marco on Tue Mar 28th, 2006 at 07:40:10 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
a significant number of French youths do indeed stay in school simply because they are so pessimistic about their job prospects
It is also the case in the US that, when there is an economic downturn, young people just go to grad school, and take student loans which accrue no interest while you're a student, you only have to pay once you're employed, and sometimes get bought out by the government (for instance, if you choose to become a high school teacher when there's a shortage, as was the case in California recently).

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Mar 28th, 2006 at 07:52:07 AM EST
[ Parent ]
Re: Emerging common wisdom (none / 0)
About 1), the important point is that the official job agency, the ANPE, is a walking catastrophe, and, if a government were serious about dealing with unemployment (which undoubtedly is a problem in France, no one here is denying that), it would completely shake up and redefine the tasks of that agency. However, if a young person is looking for a job, they will sign up there even if they don't have a right to benefits, since the ANPE gives you official job-seeker status and may open the way to vocational training programmes. Some may not bother, but I don't know if the number would be all that significant.

On people not included in the workforce (and not in school), I think the largest group is composed of women bringing up a child or children. See Alexandra in Wmass's diary Graphic statistics for a useful graph.

Someone else will have to answer about 2), whether you can go on for years signing up for the same course at college, though I suspect it's not that easy to do. This is not to say there are not young French choosing to do further courses and diplomas because they feel their job chances are slim, far from it. Mostly, I think they are in fact trying to get the diploma, not flunk out to waste time.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Mar 28th, 2006 at 09:22:14 AM EST
[ Parent ]
Emerging common wisdom: Villepin reform flawed + my counter proposal | 125 comments (125 topical, 0 editorial, 0 hidden)


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