France is Not Working

France’s chronic malaise is marked by periodic explosions of protest. The two most recent episodes – the rioting and arson in French cities last autumn and the successful student campaign earlier this year against a new law governing young labor-market entrants – seem to have little in common. But their unifying thread is youth, unemployment, and uncertainty about the future, as well as the suffocating state paternalism that underlies the wider malaise itself.

Take, for example, the desirable goal of job security. French governments have sought it in the only way they know – by ever more regulation. Unsurprisingly, rules that make it difficult to fire established workers discourage employers from hiring new ones. Insiders enjoy lavish protections, while entry barriers to the millions left outside are insurmountable.

As a result, unemployment is averaging 10% this decade and has not been below 8% for 20 years. And, while the overall level of unemployment has remained stable – albeit at a shockingly high level – the unemployment rate among young men (in the 16-24 age group) jumped from 15.3% in 1990 to 21.4% in 2005.

France’s benevolent paternalism penalizes the young beyond the labor market as well. On paper, wealth redistribution through high taxes and state transfers, reflecting Republican ideals of equality and social cohesion ( fraternité ), has brought good results. Unlike most other OECD countries, where inequalities have increased over the last 30 years, in France pre-tax income inequality decreased slightly, or at worst remained stable, from 1970 to 2000.