HOBOKEN, N.J., April 21 (UPI) -- Many economists would agree that labor regulations are the greatest difference between the United States and Europe, where they account for the rampant unemployment that today plagues many nations. Ironically, in order to deregulate, some seem to believe the solution is to pass additional regulations -- an approach that French youth and union members have been vociferously protesting in the streets.
After having made headlines a few years ago with its government-mandated 35-hour work week, France is attempting to reform its labor market. A law was recently passed to allow first-time job seekers under 26 years of age to establish a contract for up to two years with their prospective employer. Under such an agreement, young workers could be dismissed at the employer's discretion. This is a striking difference from the traditional system where a worker would be safely locked-in as a contractor for the same period of time prior to obtaining the much-desired indefinite full-time offer.
Under the traditional system, corporations are afraid to hire as the potential for dismissal is not much of an option. With the new system, employers would have more leeway in hiring and should be encouraged to do so. This has, in accordance with French history, provoked the unions that succeeded in making the government retrieve, and subsequently modify, its new law.
Free market advocates such as Alain Madelin, a former government minister and presidential candidate in 2002, believe that this law would have certainly reduced unemployment for the young, and, therefore, dynamized France's economy. Yet it was a step in the wrong direction; more regulations are not the answer. Although it is clear that free-market concern rests on very different grounds from the massive union-led protests, Madelin said it is imperative not to capitulate to the union's diktat. Unfortunately, President Jacques Chirac has not taken his former minister's advice and has decided instead that subsidizing jobs for troubled youth via an increase in cigarette tax would be an adequate alternative. Thus, the unions are rejoicing and John Maynard Keynes must be smiling in his grave.
Nations such as Britain, Ireland, Switzerland and Denmark have long understood that labor regulations are anathema to employment. In the case of Britain, Margaret Thatcher had eloquently stated that the best employment policy is to not any have employment policy! Denmark was chosen as a model by France when drafting this initial piece of legislation as Danish reforms massively cut unemployment.
Yet the German, Italian or especially the French worker may not understand or care much for additional job prospects or general economic dynamism. In the land of entitlements the secured worker is king, not the job seeker, let alone the entrepreneur. In "Cowboy Capital: European Myth, American Reality," German journalist Olaf Gersemann claims that Europeans are misled in believing that they have greater job security than Americans. For example, in Italy 60 percent of laid-off workers need more than a year to find a new job while, in the United States, over 60 percent are able to find a job within three months. It turns out that contrary to the welfare state's intentions, getting dismissed in Europe is more of an issue for the worker than in America.
The double-digit unemployment that blights many parts of Europe isn't solely due to the restrictions on dismissing people. As Gersemann also points out, payroll taxes, collective bargaining, increasingly higher minimum wage, unemployment benefits and attempts to overcome wage inequality cause disincentives to work; all are impediments to job growth. So, even if this law did get enacted, France has a plethora of reform work to accomplish in order to solve its economic ills. Sadly, this 'concession' has not only set back the pace of reform but has fattened the job-killing leviathan, an ever-growing threat to necessary salvation.
As with many issues, this trickles down onto sociological levels as well.
One can remember the media frenzy that erupted last October over the riots involving France's minorities. While in this case the rioters were predominantly white, the problem is essentially the same -- it's the economy. How can these minorities be expected to integrate when there are no jobs for them and some have ostensibly made it a habit to bite the hand that feeds, houses and gives them free healthcare? Suggestions for affirmative action legislation in France are misguided and unlikely to improve the fundamental problem.
With current controversial issues such as immigration, outsourcing and unionized factory workers being laid-off, Americans should interpret the riots in France as yet another reason to maintain, preserve and enhance their (relatively) flexible labor market devoid of counterproductive regulation -- the holy grail of American prosperity.
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(Fred Rassam works in network infrastructure and holds a Bachelor's degree in Computer Engineering from Stevens Institute of Technology. He is a Libertarian activist in both the United States and Europe.)
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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)
