The French government recently made a feeble attempt to reduce high unemployment among French youth (24 percent for those 15 to 25) by inserting a modest amount of economic reality into public policy. The attempt failed. The policy proposal was to make it easier for firms to dismiss young workers (those hired before age 26) within two years of being hired, thus making it less costly to hire them in the first place. The country's students would have none of such a free-market policy; a policy they claimed would eliminate their job security by turning them into "Kleenex" workers who could be thrown away with impunity by profiteering firms. With the support of the most politically vocal French citizens, the students won.
But one can ask, what is the value of job security if the students don't get jobs? Weren't the French students protesting against their own interests? Did they really believe that, given global competition, French companies can improve job opportunities without more flexible labor policies? Could they expect that they, and their fellow citizens, will become more prosperous without freeing up market incentives to hire more workers and direct them into their most productive employment?
Even if most French students are economically illiterate, why did they mount such an extreme reaction to such a weak proposal? The rejected labor market reform would have been only the smallest move in the right direction. It did nothing to reduce the minimum wage, to lower the high social charges imposed on employers for each worker they hire, or ease the redundancy rules (making it almost impossible to dismiss workers who become redundant) for permanent jobs. But the proposed reforms were better than nothing, and may have made it easier for France to make another move to liberalize its economy and reverse its economic stagnation. Both Britain and Ireland, with their more market-oriented economies, now have higher per-capita incomes than France.
But let's not dismiss the intelligence of the French students too quickly. From their own narrow, short-term interests, they were probably smart to protest against improved prosperity for their country. Diogenes' task of finding an honest man was surely no more difficult than the task of finding a French student who would admit to protesting for selfish reasons. No doubt they were all protesting for "liberty, equality, fraternity." But by sabotaging the hope of serious labor reform, many of the students made themselves better off, at least for a while. And their gain comes at the expense of poor French youth of foreign (mostly of North-African) descent.
Those university students in the vanguard of the anti-reform protest are the ones most likely to get the secure jobs that are becoming increasingly scarce in France. And they increased their chances by stopping labor reform in its tracks. The student leaders are predominantly well-connected, upper-class types who have learned to expect privileges, such as university attendance at almost no cost. They are unlikely to be discriminated against because of their religious or ethnic backgrounds. Young ethnic minorities in France aren't so lucky. They are discriminated against, in large measure because of the labor market restrictions the elite students fought to maintain. And why not? Discrimination protects the favored students from the competition of the less fortunate minorities for the permanent jobs that are available. This discrimination goes a long way in explaining why in some of the French communities populated primarily by North Africans, the unemployment rate exceeds 30 percent.
Most French employers prefer to hire non-minorities unless there is some offsetting advantage to taking a chance on minority workers. This could be because of prejudice against minorities, or because minorities haven't had the training desired, or because of some combination of the two. As long as labor laws restrict flexibility on wages and salaries and make it extremely difficult to terminate workers who don't turn out to be satisfactory, the unemployment rate will remain higher for the minority than non-minority workers.
Labor market reforms would have given minorities a better chance to compete for jobs, and the on-the-job training needed to begin a productive career, by being willing to work for less, at least initially. Given this opportunity, minority workers would have a strong motivation to achieve the job security and good pay that comes from hard work and competence, not from privilege and protection again competition. Employers who continue to discriminate in competitive labor markets soon find themselves losing market share and profits to employers who quit discriminating and begin hiring the most cost-effective workers whether they are minorities or not. The cost of discriminating against minorities is particularly high when employers face intense competition, which globalization is increasingly forcing on French employers. Don't expect the students who protested against labor reform to protest in favor of globalization anytime soon.
A more competitive labor market would increase productivity and reduce unemployment in France, but it would also undermine the artificial job security that so many French students now believe should be their right. Most of these students have no doubt managed to convince themselves that when sabotaging even the mildest labor reform they were also marching for the glory of France and, of course, the goal of "liberty, equality, fraternity." Self-delusions are always comforting, certainly more comforting than reality. The reality (which, as Thomas Sowell tells us, is not optional) is that the French students were protesting against the freedom of contract, against equality of opportunity and for discrimination against, rather than fraternity with, the least advantaged of their fellow citizens.
Dwight Lee is professor at the Terry College of Business, University of Georgia.