In America we have a jobless percentage of about 4.5% plus or minus .5 as a general rule. In our African-American communities, the jobless rate is roughly double that, and usually hovers around the 8% to 9% range. We hawk that number, using it to evaluate Presidential effectiveness, and where the economy is at any given time. When that unemployment rate increases, we groan, we start assigning blame to inept fiscal management by the Republican or Democrat who happens to be in the White House at the time. When that unemployment rate decreases the President generally gets a little more flexibility and freedom on the economic front. That is the way it works in America, people want jobs, they want to work, and when they can't the incumbent president probably will have a difficult time winning the next election.

Fast forward to France. The hot news story of the day is the 1 Million plus workers rioting over the proposed law to make it easier for business owners to fire workers under the age of 26. In a Chicago Tribune Story, Strikes & Protest Grip France, by Tom Hundly he states:

“The point of contention is a new labor law called the First Employment Contract, set to take effect next month, which would allow businesses to dismiss new hires under the age of 26 without cause during the first two years of their employment.

The idea is to make it easier for employers to hire young people, but students see it as an attempt to dismantle the elaborate social welfare system that they take as their due.”

On the surface, it is easy for people not familiar with the political structure of France or basic economics to say, "Damn right, they should be protected and not be able to be fired without cause", but this ability to fire and hire is precisely why America maintains such a low unemployment rate. Let's make a comparison. Currently in France, the overall unemployment rate is around 9.6% (the approximate rate for Blacks here in America). This particular demographic of young workers has a staggering unemployment rate of over 20%! In the same Chicago Tribune article it states:

“The jobless rate for people under age 30 in France is 23 percent. Overall unemployment is 9.6 percent.”

This means that in France roughly 1 out of every 4 able bodied adults under 30 are not able to find a job and 1 out of 10 adults of any age. The question which many then ask is why is there such a disparity between young workers and their ability to find employment and individuals over thirty and their ability to find employment? The second question many will ask is why is the unemployment rate so high in a nation with the 5th largest GDP? A common answer to both is the difficulty in terminating employees by business owners in France due to liberal French labor law that overly protects workers. According to Triplets & Associates, in an article titled, French Employment Law: Dismissing Employees in France:

“Employment in France is not 'at will' and thus dismissals may only come about on demonstrably and limited objective grounds, which must be brought to the attention of the employee in writing.

Dismissals are subject to stringent, and often bureaucratic, procedural statutory constraints.

Redundancies, or lay-offs on economic grounds, are subject to separate and complex procedural and substantive constraints particularly in the case of multiple dismissals.”

Here is how the game works. Because it is so difficult to fire employees, companies are hesitant to hire new employees because if the economy shifts and there is a downturn they can not let employees go to maintain profit. Secondly, the employment taxation rate on having an employee work for you in the first place is above 50%. As reported by in an article titled OECD says employment taxes above 50 pct in Germany, France, Belgium in Forbes.com:

“It said the tax wedge -- the share of total labour costs taken by the state in income tax and social security contributions -- was 55.4 pct in Belgium, 51.8 pct in Germany and 50.1 pct in France.

In contrast, the tax wedge figure for the US was 29.1 pct, for the UK 33.5 pct and Japan 27.7 pct.”

So now employers are in a catch 22. Due to the government making it extremely difficult to fire employees even in a market downturn and also the high cost of maintaining an employee because of labor taxation, employers won’t let old underperforming workers, or workers who have the wrong skill set for the current market go. Because the cost of adding a new worker to the staff is so high, plus you can’t get rid of him if “he doesn’t work out” employers shy away from hiring new employees or younger employees, pushing that demographic group’s unemployment rate up. Therefore you have a system where the older employees, who are protected because they are in the labor market in France, are holding on to jobs longer than they probably should where a young person may be more effective. You also have the concurrent stagnation of new job creation because it cost so much for employers in taxation to risk expansion and hire new employees. 

This is the effect of the liberal mindset in France that operates on a theory that government should protect workers at the expense of business beyond what is rational in a free market. French law does protect the worker in the labor force, but it doesn't protect the able bodied worker who wants to join the labor force because it limits employment opportunities to the tune of a standard 9% plus unemployment rate nationally as a whole, and a 20% plus unemployment rate for workers under the age of 30. French law also harms businesses because the businesses can’t expand, and hire workers (and reduce the unemployment rate) without the risk of being stuck with a 50% employment tax and an employee that even if they can’t perform the job they were hired for can not be let go.

As much as people resist tax cuts for business and the lack of worker protection here in the U.S., on a macro scale it keeps our unemployment rate low, and the ability of our businesses to expand and hire high. That is how capitalism works. 

So when we complain about the American economic system, layoffs, unemployment rate and economy here, consider one thing, we could be France.

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