French Youth Riots

Recent civil unrest in France has garnered the headlines in most major publications in the past few weeks. French youth, a sizable chunk jobless, are violently protesting a new labor law which will allow firms to fire anyone under the age of 26 without justification. The law was proposed in light of the staggering unemployment rate among French youth, which hovers around 25 percent (reaching 50 percent in some suburbs), as a means of lessening the rigidity in French labor markets.

At first such logic seems counterintuitive. Seemingly, a law that allows for unmitigated firing would exacerbate unemployment, not alleviate it. However, such logic is devoid of understanding some basic economic principles, namely, that when the cost of anything is artificially inflated, the demand for it goes down.

France’s current labor system structure essentially guarantees lifetime employment. It sounds wonderful at first, but virtual life-long employment has serious implications for people who are seeking jobs. Because of current legislation in France, the cost for hiring an employee is exorbitant, simply because once employed, the worker is practically tied to the company until death. Since employers cannot readily separate from employees, firms hire fewer workers instead of incurring the lifetime costs associated with a larger payroll. This acts as an effective barrier to employment, much like what unions are notorious for propagating since their existence. As a basic rule of thumb, whenever labor markets become rigid, in the sense that labor cannot move freely within the market, higher unemployment results because firms are hesitant to take on a larger workforce. The individuals left behind are the youth, seeing that they have a much more difficult time competing with workers who are already firmly entrenched in the system.

Such economic principles and basic understanding of labor market functions makes the current situation in France all the more perplexing. Instead of youth leaders championing this law as a step in the right direction for inexperienced workers to get their proverbial “foot in the door,” they resort to violence and call for “increased job security,” even though a quarter of their workforce doesn’t have a job in the first place. Such backwards thinking is emblematic of France’s current economic situation, where they further indulge deeper into more extensive welfare entitlements and lagging productivity.

The entitlement sentiment in France in particular and industrialized Europe in general is leading to their demise as a worldwide economic superpower. Moreover, it further demonstrates France’s ineptitude towards creating an environment which can be increasingly competitive within the globalized context of contemporary economic affairs. This can be evidenced by France’s anemic, less than 2 percent, growth rate since 1992. The numbers are even bleaker for its European counterparts, like Germany’s paltry average of only 1.4 percent growth in its GDP over the same period. This can be compared to the United States’ average growth rate of 3 percent to 4 percent, which is substantial once one takes into account how advanced many western economies are.

The European entitlement mentality must yield to a merit-based system which rewards hard work and ingenuity. Their socialist framework is proving to be unsustainable; the sooner they recognize it, the better off they’ll be.