TCS Daily


French Students Rally for Discrimination

By Dwight R. Lee - May 5, 2006 12:00 AM

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.

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6 Comments

Workers unit...
Its from the input of labor that all value is added, for the captilist to take from the worker that which is his is unjust... okay I'm just kidding but I wanted to be the first person to get the discussion going on this topic.

On one hand, adding flexibility to the labor market is good, but on the other hand its kinda screwed to do it just to young people. This is the same kind of idea that you see in some stagnent employment sectors where the system is set up for you to "pay your dues" and work below true value for the benefit of the people that entered the system before you. The person is compelled to do this not for the direct benefit of his pay, but for the promise of future benefit when its HIS turn to be on top. Unions are like this kind of BS. Its a bad system for too many reason to list here.

I'd vote for the same rules for all workers- that is flexibility in employment for all ages across all sectors. Its one of these things that a limited application of a principal has an opposite effect of a complete application of that same principal.

To make an analogy, lets say the a politician thought the cost of roofers was too expensive compared to the world price of that skill. So he makes an immigration rule- Any roofer can instantly come to the US to work as a roofer. So the society would have its costs reduced some small amount by the decrease in the cost of roofing labor, but if you happened to be a roofer before that rule, you'd get nailed, and your employment in that trade would be likely disrupted. So its only cool if you do it for everyone, not just the people who have no lobby.

Discrimination and immigration
Speking of immigration...I can see what Mexicans want to come to the US, but what in the world is drawing North-Africans to France? With 30% unemployment there must be something luring them.

N. African's in France
I believe that most of the N. African's currently living in France immigrated back in the 50's and 60's. Back then France was doing a lot better than they are today.

oops
forgot to add

--- or are descended from those who immigrated in the 50's and 60's.

That's easy
Read the Economic section here:

http://en.wikipedia.org/wiki/Social_situation_in_the_French_suburbs

Here's the key bit:

"As in every country, some areas have a very high unemployement rate. Social security, unemployement and other welfare system benefits allow families with no paid income to survive for an indefinite period. Welfare benefits include housing benefits and allocations familiales (welfare benefits for children). The sum that is paid to a non-working family is similar to that which one would receive working at a minimum wage part time job. In France, there is a minimum salary called the SMIC: salaire minimum interprofessionnel de croissance. This is the minimal interprofessional wage which follows the economic growth of the country [12]). It is illegal to hire someone for less than it. In 2005, the SMIC was 8.03 EUR per hour, 1,217.88 EUR per month for a full-time job."

True, and
while most came in the 50s and 60s there's still some illegal and migrant workers coming into France and staying. Compared to Algeria or Tunisia, living in France is paradise.

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