I almost sold a company I owned to a French company years ago. I went to Paris and given a royal tour. I was shown several of their divisions there in Paris and met a number of their managers. One of the common items of discussions was their labor challenges. They were unable to be fast and nimble in taking on new accounts or clients. They have almost no labor flexibility, meaning, they were unable add a lot of new workers and if the project didn't work out, then lay those workers off. They were all very cautious about hiring new workers, because once you brought a worker on, it was virtually impossible to lay them off. This brought a very cautionary approach to growth.
Robert J Samuelson, of Newsweek, explains the national French pysche about this issue:
Hardly anyone wants to surrender the benefits and protections of today's generous welfare state, but the fierce attachment to these costly and self-defeating programs prevents Europe from preparing for a future that, though it may be deplored, is inevitable.
What is the impact of these rigid labor laws?
...its economy is lackluster. From 2001 to 2005, annual growth averaged only 1.6 percent. By accident and design, the French have discouraged work...
- From 1994 to 2003, unemployment among prime-age adults, from 25 to 54, averaged 9.9 percent; for those 15 to 25, the average was 24 percent.
- In 2003, French workers spent an average of 1,431 hours on the job, the third lowest among 26 advanced countries. Italy (1,591 hours) was 11 percent higher, the United States (1,822 hours) 27 percent and South Korea (2,390 hours, the highest) 67 percent.
- Among those 60 to 64, only about one in six have jobs. In the United States, the comparable figure is about one in two; for all OECD countries it's about four in 10.
These protests demanding protection of their welfare state have weakened the current French leadership and opened the way for a socialist candidate to be competitive.
It is time for the French to have a basic lesson in economics about the consequences of setting floors and ceilings.
You take away the ability to say "You're fired" and you reduced the ability to say, "You're hired" and you will have rising unemployment.
You will have stagnant growth, become less competitive on in the world economy, and have increasing civil unrest.
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