THE FRENCH PROTESTS….Are French students living in a dreamworld? Refusing to acknowledge economic reality in a globalized world? Insisting on a right not to be fired that’s been unrealistic for at least the past couple of decades?
So far, coverage in the American media hasn’t told us much except that French students like to protest, but anyone who’s seen Les Mis?rables recognizes that as a cultural tradition that goes back a very long way indeed. The question is: are they being out of touch with reality when they protest for the right to lifetime employment once they’re hired? Or is the inability to fire people one of the drivers behind high French youth unemployment rates?
My personal view is that I’m not very enthusiastic about either France’s “nobody ever gets fired” laws or America’s “you can get fired for being a cat lover instead of a dog lover” laws. (In most U.S. states, you can be fired without cause at any time. The only restriction is that you can’t be fired because of your race, gender, religion, or for a few other specifically defined reasons.) But my feelings are based mostly on moral and cultural grounds. What about the economic arguments?
Do strict employment laws drive up unemployment? The basic claim is pretty simple: if it’s hard to fire people, you’re going to think very hard before you take a flyer and hire someone essentially for life. Conversely, if hiring someone weren’t a 40-year commitment, maybe French companies would be more willing to take a chance on hiring more people, especially young people.
Now, my personal experience suggests otherwise. My old company hired Europeans pretty much the same way we hired Americans: every year we budgeted for the number of positions we thought was justified by sales projections, and the responsible managers then hired people. We filled jobs in Europe as fast as we did in America. In other words, French (or Belgian or German) laws didn’t have much effect on our hiring, which was driven mostly by other more basic concerns.
But guess what? It turns out that this experience is true generally. Brad Plumer rounds up a bunch of evidence that suggests (a) plenty of countries with strict employment laws also have low unemployment rates, (b) there’s not much of a correlation between labor laws and unemployment rates, and (c) when you compare apples to apples, France’s unemployment rate isn’t as high as it looks anyway.
For mostly libertarian reasons, I still think employers should have the right to decide who they want to employ and should be able to fire people without going through too wildly onerous a process. And it could be that France would benefit from more flexibility in that regard. But that said, the economic arguments don’t seem to hold much water. Labor laws probably don’t have much impact on unemployment to begin with, and France’s overall economy is in pretty good shape anyway. So let ’em protest.