Bonjour!
France… the country known for crispy-crusted Baguette, saying “Oh La La” a-lot, tour
de France, Notre-Dame Cathedral, Eiffel Tower, the 3rd biggest economy of Europe and as the
7th largest economy in the world by GDP.
If you are French, the place to write “Oh La La!” is in the comment section below!
The country’s economy has four major components; Immensely strong businesses, immensely strong
trade unions, immensely strong government, and last but not least, immensely strong people.
These four constantly oppose and negotiate with each other, but somehow, sort of manage
to make it work!
Due to their constant opposition, any real long-term change happens slowly.
But, the government, trade unions, businesses, and the people, do share common grounds.
The people of France have a free education, a 35-hour work-week, six weeks’ annual vacation,
paid parental leave, retirement age at 62, an attractive welfare safety net, and a free
universal health care system declared the best by World Health Organization, But these
benefits didn’t just fall from the sky!
These rights were fought for by the people over the years.
You may have heard about the French always on strike.
French while not completely saints, do NOT go on strikes as much as other countries,
In fact, a lot less than how it is projected in the media.
But the reason this stereotype exists is that when they do go on a strike, they make it
very visible.
Whether farmers in tractors dumping vegetables in front of the French Parliament, or truckers
driving at a snail’s pace to halt major roads, or wearing the yellow vest making it
a movement, French protests are vibrant and they make it heard.
And somehow it seems to work for France!
This French spirit cannot be understood without maybe understanding the French Revolution,
of which we won’t go into the details, because it was messy and bloody, except for concluding
that despite fine wines, delicious cuisine, high fashion, and hundreds of different cheese
to choose from, the French are Les Misérables.
Revolution, fighting for their rights, and the soul of Napoleon Bonaparte lives in them.
Or as they say, “France is a paradise inhabited by people who believe they’re in hell.”
While the French have a lot to be grateful for, not everything in France is Oh La La!
and one of the things is high unemployment rates.
The topic of the French economy goes untouched without talking about its high unemployment
rate.
More importantly unemployment among young individuals.
While it's not as bad as some of the other countries like Spain and Greece, it’s still
one of the highest in the European Union and among the nations that are described as developed.
It is to be noted that the unemployment rate in France is different from other countries
because it does not include mini-jobs, unpaid work, etc. which is the sort of data used
by many other countries to inflate employment numbers.
That being said, France struggles with a structural unemployment issue.
The total unemployment rate has not fallen below 7 percent in over three decades.
On the other hand, the employment rate, which is a measure of the extent to which available
labor is used, is around 65%, This rate is lower than the OECD average of 67%.
Compare this to neighbor Germany that uses over 75% of the people available to work.
This means the social-security net responsible for helping the unemployed is powered by a
smaller proportion of the population.
In other words, a high number of people are not contributing to the economy while using
the public benefits.
There are multiple reasons behind the unemployment issue.
We will discuss four of the major ones.
French work fewer hours compared to other countries, 35 hours a week.
The minimum wage in France is 1,554 Euro which is one of the top five in the world if we
ignore the micro-nations.
There has always been a correlation between the minimum wage and the unemployment rate.
In simple words, when wages are low, businesses hire more people.
When wages are high, businesses pull back and hire fewer employees.
High employment or High wages?
Which one is better?
Well, you decide!
This sounds like a trade-off.
When you fix one thing, the other becomes a problem.
But can we have the best of both worlds?
Now you can’t just lower the minimum wage to fix the unemployment issue.
Why?
Because there would be protests and in France, there would be an even bigger protest, stronger
than the head of Zinedine Zidane.
In short, once you give something to the citizen, you can’t take it away.
And that's true for any country in the world.
So our question is, is unemployment really an issue because it seems like, intentionally
or unintentionally, France has chosen to keep the wages high compared to having more workers
employed.
Another perspective to ignore the high minimum wage is its relation with the cost of living,
which is different in every country.
France is no Switzerland or Norway when it comes to the cost of living, but it's still
in the top 20 list.
So lowering the wages is a big no as well comparing wages of different countries.
Another factor for the high unemployment rate is related to the education sector that produces
more graduates in fields, you know the arts and social sciences, that are not in sync
with the job market.
Although this factor is true in many developed nations and has not been raised as an issue
yet.
The third factor is the employment tax.
It is common sense that if you have to discourage something, you put high taxes on it.
That's why stuff like cigarettes has high taxes on it.
But why would you put high taxes on employment?
France has one of the highest payroll taxes in the world.
Employers pay a big chunk of these taxes compared to employees which directly impacts the job
market as employers need to figure out how many employees they can hire based on the
cash available.
While you can certainly argue that this money goes to support healthcare and retirement
benefits, taxing employment is still ridiculous while complaining about the high unemployment
in the country.
The fourth factor is strong labor laws which no doubt have their benefits.
It's difficult to fire people so the businesses make it difficult to hire them in the first
place.
Businesses hire only if it's absolutely necessary and there is no way around it.
Once you are hired, there are limited working hours and long lunch breaks that results in
limited output compared to what they could have produced otherwise.
But the French believe in “Joie de vivre” and that's the choice they are comfortable
with.
If you sum up all these factors, it's still less of a problem for big corporations compared
to small businesses.
Small businesses hesitate to create new jobs to avoid considerable penalties for laying
off any employees.
They are turned towards other options that include outsourcing work to foreign entities
or resort to offering temporary contracts instead of full-time employment.
Although only a little above 10 percent of the employees are members of unions, they
do have too much power.
This makes the governments of any political leaning give in to the Union demands to keep
the popularity and stability.
The country has taken some reforms in recent years by lowering the tax burden on businesses
but it will take few years to see any significant results.
The French economy is robust in many sectors including aerospace, automotive, railways,
power generation, defense, as well as cosmetics, luxury goods, pharmaceuticals, agriculture,
and hospitality.
France has a complete economy.
From satellites to nukes and submarines, from planes to cars, from ships to trains, the
French economy is diverse enough to produce almost anything it wants to with resources
in hand.
Only a handful of other countries can profess this capability.
France is the 5th largest exporter country in the world.
The country sits high on the innovation index and has the fourth highest number of Nobel
Prize winners.
When talking about the economic drivers in France, you stumble upon what's called Dirigisme,
which is not just regulatory or minimum intervention, but a more directive role by the state.
It has been the country’s biggest strength as well as its biggest weakness.
The government’s directive role in the economy is more regulatory than post-Reagan America
and post-Thatcher Britain.
France may not be the number one by tourist spending but it's the most visited country
in the world.
The travel and tourism sector contributes nearly 10 percent of the total GDP but it
is one of the most important sectors as it creates a soft image of the country.
The influx of tourists is also of great importance for the French luxury market that has a huge
fan base among Americans and Chinese tourists buying those fancy designer bags and footwear
labeled “made in France”.
The charm of the city-of-lights Paris makes your social media profiles look good with
those dreamy photos.
If you don’t mind the cold-shouldered French waiters, tourism also contributes to the food
industry including the snails and the popular or not so popular frog legs.
The culture, fashion and landscape, has earned France an international repute as the world's
most popular tourist destination.
France has not recorded a current account surplus in over a decade.
The country has been witnessing a current account deficit since 2006, which means the
country spends more on imports than it receives on exports.
More simply, there is more money going out of the country than there is coming in.
France has a high debt that was nearly the same as their total GDP, although it went
even higher during the covid pandemic, crossing 115 percent of the total GDP.
One of the reasons for this debt is government spending.
The country’s government spends a lot.
Like a lot a lot.
The government of France is the biggest spender of money among OECD’s 37 member countries.
This debt is made possible with the lower interest rate which is okay for now but it
could get stinky in the future, more than the stinkiest French cheese.
A good case can be made for the presence of economic nationalism in France.
Their innate capacity to support local products.
The industries like AXA, Renault, BNP, etc. are closely interlaced into politics.
Foreign companies trying to compete with these industries have a difficult time getting into
the same market.
France has historically higher corporate tax rates.
The high corporate taxes was one of the many reasons for high unemployment, as the businesses
end up exporting the jobs, outsourcing manufacturing to low-wage countries, and offshoring.
But in the last few years, they have managed to lower the taxes on businesses to make the
economy more business-friendly.
France being a member state of the European Union struggles against competitive markets
offering high-quality products like Germany.
On the other hand, eastern and southern European countries compete against the country with
lower prices.
While French companies are facing issues to gain market share internationally and somewhat
struggling with competitiveness, the country has seen an increase in foreign direct investment
in recent years that makes it a more feasible place for foreign companies to do business.
The country’s energy demand is primarily fulfilled by nuclear energy that accounts
for above third-fourth of the total electricity consumption.
Heavily focused on the nuclear energy sector makes it one of the smallest carbon emitters
among the top industrialized countries.
France is the third-largest weapon exporters in the world.
The country has received criticism for selling weapons to war-torn regions which have witnessed
human rights abuses.
France, despite having no gold mines, has the fourth biggest gold reserves in the world.
The Bank of France also stores gold in Paris as a custodian on behalf of other central
banks.
The country has also been accused of obtaining some of its gold reserves and wealth from
the African countries it had colonized.
As we discussed earlier, the legal length of the working week in France is 35 hours,
but before you call the French lazy, you should know that they are highly productive.
According to the data by OECD, France seems to compete quite well and even beats some
other countries when it comes to GDP per hour worked.
Although a counterclaim to this argument could be that France has fewer people hired from
the total number of people available to work, so they are just using the most productive
people.
But this is an endless debate with tons of different arguments.
But you could certainly deduce that the French are not as lazy as it looks to the outside
world.
It could have something to do with how they value the quality of life.
There is a French proverb too that says, “If working hard made you rich, donkeys would
be covered in gold.”
While the economy of France has its issues and it's not perfect like anything else in
life, France has a lot to be grateful for.
If we ignore the people’s general pessimism and the passion for complaining, France and
its economy are quite Oh La La!
We hope you have enjoyed the video.
We would try to reply to everyone in the comment section below.
Please like, subscribe, and share to support the channel.