One of my first blog posts, back in 2009, featured Veronique de Rugy in a video, warning that America should not adopt the statist policies that caused so much damage in her home country of France.
Sadly (but predictably), the politicians in Washington ignored Veronique’s sage advice. The burden of government has expanded since that video was released, including the adoption of costly Obamacare legislation.
But if there was a contest among nations for the worst public policy, France would still have a comfortable lead over the United States. For every bone-headed step in Washington to increase taxes, spending, and regulation, it seems there are two similar steps in Paris.
Obama wants to increase the top tax rate in America to 39.6 percent, for instance, but Hollande wants a top tax rate of 75 percent, making Obama look like a libertarian by comparison.
France also has a much more interventionist approach to labor markets. Here are some depressing features of French employment law, as reported by Business Week.
The country has 2.4 times as many companies with 49 employees as with 50. What difference does one employee make? Plenty, according to the French labor code. Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons. French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones. “I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies,” Thierry Breton, chief executive officer of consulting firm Atos and Minister of Finance from 2005 to 2007, said at a Paris conference on April 4. “I’d ask, ‘Why companies?’ He’d say, ‘Oh, I have several so that I can keep [the workforce] under 50.’
Not surprisingly, French workers are the main victims of this policy. At the risk of stating the obvious, if you make it more expensive to hire workers, there will be fewer jobs. The Business Week article adds more discouraging details.
Companies say the biggest obstacle to hiring is the 102-year-old Code du Travail, a 3,200-page rule book that dictates everything from job classifications to the ability to fire workers. Many of these rules kick in after a company’s French payroll creeps beyond 49. …Pierrick Haan, CEO of Dupont Medical (not to be confused with chemical company DuPont (DD)), decided last year to return production of some wheelchairs and medical equipment to France. The 150-year-old company, based in Frouard in eastern France, created 20 jobs making custom devices at a French plant—and will stop there. …“The cost of labor isn’t the main problem, it’s the rigidities,” Haan says. “If you make a mistake in your hiring plans, you can’t correct it.” …The code sets hurdles for any company that seeks to shed jobs when it’s turning a profit. It also grants judges the authority to reverse staff cuts years after they’re initiated if companies don’t follow the rules. The courts even deem some violations of the code a criminal offense that could send executives to jail.
Keep in mind, by the way, that this describes current French law. Hollande will probably choose to adopt additional policies that discourage job creation. All for the alleged purpose of protecting the rights of labor, of course.
No wonder so many investors and entrepreneurs are looking to move to places where hard work and success are rewarded rather than penalized.
The one thing that puzzles me is why the French people don’t rise up against the corrupt political elite. A poll from 2010 showed that French voters favored spending cuts. And another poll showed that more than one-half of French people would consider moving to America if they had the opportunity. So there’s definitely discontent.
But I suppose I shouldn’t be puzzled. American voters generally reject statism in polls but routinely are forced to choose from the lesser of two evils (or should that be the evil of two lessers?) during elections, so perhaps the lesson to be learned is that politics brings out the inner Julia in all peoples.
