|December 31, 2006||Posted by Staff under Progress Report, The Progress Report|
French Youth Want Sécurité
by Fred E. Foldvary, Senior Editor
by Fred E. Foldvary, Senior Editor
I see Frances underpants! Earlier France was afflicted by Muslim rioters frustrated by lack of economic opportunity. Now French youth are marching to protest a new law, the First Employment Contract, which would make it easier for firms to fire hired labor of age 25 or less during their first two years of employment. What a travesty for the land that coined the rousing free-market motto, Laissez Faire, Laissez Aller, Laissez Passer!
Prime Minister Dominique de Villepin conducted the passage of the law through Parliament in February 2006, sparking the nationwide marches. The law has been upheld by the French Constitutional Council. President Jacques Chirac said he would seek to have that law implemented despite the demonstrations, but would reduce the trial period to one year, and require the employer to provide a reason justifying the dismissal. But many students as well as labor unions are still opposed to this law, and will continue to protest it.
About one-fourth of French youth are unemployed, the highest rate in western Europe. They see this law as enabling employers to exploit young workers during the trial, and then dismissing them. They seek jobs with good pay, excellent working conditions, several weeks of vacation, plus sick leave and perhaps free wine and cheese. Most of all, they want jobs in which they can never get fired, even if they take time off to protest Americas domination of the world.
It is not a bad thing to want job security. But an artificial job security mandated by law is economic poison. If the law makes it difficult to fire a worker, then employers will be very cautious in hiring labor, and hire less labor. Such a law will increase the cost of labor, as the firm is stuck with less productive workers. Investment will flee to foreign countries where labor laws are less restrictive.
The high unemployment in Western Europe, as in South Africa and elsewhere, is caused by restrictive labor laws plus taxes on employment. Put in a high minimum wage, add taxes on employment, and make it impossible to fire bad workers, and you get high unemployment.
In contrast, the pure free market can provide genuine security at full employment and high wages. The free market has a natural minimum wage, the productivity of a low-skilled worker at the margin of production, the least productive land in use. In the pure free market, there is no tax on wages, and no taxes on employers for unemployment payments, disability, and social security. Wages are higher than in intervention-laden economies because of higher productivity, more employment, and no taxes.
Free-market job security comes from market clearing. A free-market price is set where the quantity demanded equals the quantity supplied. If there is a surplus of labor, the market wage falls and the unemployed get hired. If there is a labor shortage, the wage rises. That is the function of market prices, to bring the quantities supplied and demanded into equality.
But for the market to do its job, all interventions have to be eliminated. There has to be no minimum wage, no hard-to-fire law, and no taxes on employment. Thats what the French economists of the 1700s called for — free trade within the economy as well as in foreign trade.
French youth should be marching for liberté, not forced sécurité. Unfortunately, French students are not reading the works of the great French economists, the Physiocrats of the 1700s as well as Frédéric Bastiat. They dont understand the word liberté in their national motto. The nations great heritage is slipping away as the policy of dirigisme creates unrest among the youth and alienated Muslim immigrants.
France remains a beautiful place to visit, but I wouldnt want to work there. There is much to admire about French culture, but its conceit that government can improve the economy by central direction is a flaw that could doom France more fatally than its previous lack of adequate defenses against German invasion. France needs an economic Louis Pasteur who will show the French the mental germs that are making the French economically ill.
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