Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
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The greatest achievement of French statism: high unemployment

By Nicolas Lecaussin

Can you imagine that unemployment has been “priority number one” for French politicians over the past 35 years! Left, right and center have all claimed that their first objective was to reduce unemployment, in particular among young people. Yet they have failed every time. Former president Nicolas Sarkozy regularly repeated that “the French social model has protected us from the crisis”.

Reality is painfully different, since the number of unemployed recently rose above 3 million. The jobless rate (10.2 per cent) is twice as high as in Germany and the Netherlands, higher than in the United Kingdom and in the United States. Among the 34 OECD member countries, France has the sixth highest unemployment rate. Since the late 1970s, unemployment in France has oscillated around 10 per cent with a record high of 14 per cent in the early 1990s. During this period French unemployment was consistently higher than that of its main European partners, and clearly above US unemployment.

Even before the current crisis, in 2005 when things improved slightly, the unemployment rate did not fall further than 7.6 per cent of the working population, remaining above the European and the OECD averages. In December 2008, this figure was 7.9 per cent whereas the EU average was 7 per cent against 6 per cent in the US (even Germany performed better with 7.1 per cent).

Worse, politicians persist in proposing the same old statist policies that have constantly failed in the past. The socialist government has proposed subsidized jobs for the young whose jobless rate is almost 23 per cent (three times higher than among young Germans). These are labelled “jobs of the future”. Michel Sapin, minister of Labor, intends to create 100,000 such jobs in early 2013 and another 50,000 in 2014. This amounts to 150,000 jobs financed by the government to 75 per cent at a total cost of some 1.5 billion euros.

Clearly our politicians have yet to grasp that these jobs (this is what you see) will be financed with public funding coming from taxpayers and businesses (this is what you don’t see). How can you possibly ask companies to hire when taxes keep going up? Also, these “jobs of the future” are subsidized twice as much in the public and semi-public sector! Yet it is the companies in the private sector that create the “sustainable” jobs which the government seeks. Vincent Peillon, the minister of Education, even rejoices that “starting in January 6,000 students selected by social criteria will have the possibility for three years to fulfill their dream and become civil servants » (sic).

In the name of statism, governments on the left and on the right have wasted tens of billions of euros to create public or semi-public jobs with the most grotesque objectives. This is called “the social treatment of unemployment”, i.e. churning out subsidized jobs in order to fake the labor statistics. Sustainable unemployment will remain one of the greatest achievements of French social policy, and one of the most blatant failures of government intervention.

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