Two weeks ago, France experienced one of its biggest strikes in recent history. Over 400,000 people demonstrated across the country, lambasting President Francois Hollande’s administration with particular regard to the recently implemented labor code, an initiative that will make it significantly easier for companies to fire personnel on economic grounds.
While a large portion of the protests were organized by labor unions in various industries, the strikes also comprised a large number of unemployed, college-age students. These students are afraid the new labor code takes away their autonomy in the job market, bringing France “back to the 19th century.” French leftists in general are notorious for their “anti-industry” stance, arguing the well-being of individual employees should always take precedence over the economic success of an entire corporation. But to what degree does this “pro-employee” mentality actually benefit working individuals?
A rampant social convention exists in France where employees engage in lengthy, costly lawsuits after being fired from their particular company, and — because the French legal system tends to favor these individuals — the lawsuits often result in companies being forced to award tens of thousands of euros to each individual they fired. Naturally, the combined costs of the lawsuits and the subsequent monetary awards tend to be inconvenient, as companies are obligated to devote time and resources to court cases rather than improving work conditions or expanding their business.
In fact, one can argue employee lawsuits — along with the labor code as a whole — have played a significant role in perpetuating France’s unemployment rate, which has hovered for several years around 10 percent. In 2013, for example, tech-company Mandriva was forced to declare bankruptcy after losing a lawsuit to several employees who had been fired a year earlier for economic reasons. The company completely liquidated in 2015, eliminating an organization that was “at the tipping point of profitability” and forcing a large number of working-age people into unemployment in the process.
Here is the fact that French protestors are simply not grasping: unemployment drops when companies have more liberty to make rational economic choices. Protesters claim the labor law will create “insecurity for life,” but they fail to recognize that this “insecurity” is merely the natural and necessary phenomenon of frictional unemployment, where individuals can flow freely between job sectors in order to find positions in which they are the most productive. An economy without frictional unemployment — where wage-earners are essentially locked into their positions for life — creates a “stagnant system that suppresses innovation and rusticates skills.”
For all of his blunders as an executive, Hollande has successfully pinpointed the reason for France’s loss of economic prowess in the global economy. According to the Heritage Foundation’s 2016 Index of Economic Freedom, France’s “labor freedom” statistic — a comprehensive measure of labor flexibility and regulatory obstacles to productivity — has dropped to 43.5 percent, which is 15 percent below the world average and pales in comparison to the United Kingdom’s 71.8 percent or the United States’ 91.4 percent. Unsurprisingly, countries with high labor freedom such as the United States, where companies have far more leverage than individuals or the government in negotiating labor contracts, tend to have higher rates of economic growth.
The Organization for Economic Co-operation and Development reached a similar conclusion in its “Economic Survey of France 2015,” stating the rigidity of France’s labor market was a major factor in the nation’s sputtering economic growth in recent years, and that the nation should reform its “long and complex layoff procedures.”
While the protests stem from a meaningful place — namely the 29.5 percent unemployment rate for ages 15 to 24 and the generally low wages for employees in sectors such as the transportation industry — attacking labor reform is an immensely counterproductive practice that only succeeds in prolonging the damage caused by France’s broken system. The political left may regard corporations as evil spigots of greed, but perhaps they need to step back and analyze who is doing the most damage.
Ryan Gorman is an Opinion columnist for The Cavalier Daily. He can be reached at r.gorman@cavalierdaily.com.
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