The French Labor Riots

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French students
are rioting to protest a system that will give them easier access
to the job market. The unemployment rate among French youth is the
highest in Europe, 23 percent. In the suburbs troubled by riots
over the holidays, the unemployment rates among young people border
on 50 percent. I have trouble seeing why these kids are rioting.

Prime Minister
Dominique de Villepin has championed a program where there is a
special labor contract for young inexperienced employees. The employer
can fire the employee at will within the first two years of employment,
thus minimizing the risk of hiring an employee without a proven
record. They have two years to prove their worth and get some experience
on the record, which will give them a benefit when they apply for
the next job. Of course, this idea is earth shattering in a country
so inundated with union power that the economy is slowly grinding
towards a standstill.

The students
are rioting because they want the same rights as employers with
a proven record of accomplishment. They do not see that the proposed
program actually gives them an advantage over more experienced workers.
Because recent graduates have no work experience, they can underbid
the more experienced workers on wage requirements. The youth labor
contract lowers the employers risk exposure of betting on the new
kid on the block. De Villepin is providing two powerful incentives
to hire young people.

If there was
any rhyme and reason to the rioting, the people taking to the streets
to riot should be established workers defending their advantage
in the labor market.

I can’t help
but wonder how the idea of employment in Europe was turned on its
head. It seems like the current paradigm is that there is a right
to an income, a right to a job, regardless of whether the individual
is contributing or not. Let’s recap the basic idea of markets.

The labor market
is a market where the exchange of labor for wages is supposed to
bring both the employee and the employer more value than if they
did not do the exchange in the first place. The employee gets money
to exchange for other necessities of life. The employer has enough
labor to produce the products she makes money on selling. Both parties
benefit from this exchange.

Should one
party stop benefiting, let’s say the employee no longer receives
money for his labor, he has the right to stop exchanging his labor
with the employer. The contract has been broken. The employers right
to stop exchanging money for labor she doesn't benefit from has
been limited in the current system. The cost of firing someone that
does not contribute exceeds the cost of training wasted on the employee
who doesn't perform.

When tenure
is added as a requirement for exchanges in the labor market, the
people who gain are the people who freeload. The freeloader is not
only depriving the employer of the value of his work, which is the
equivalent of fraud. It is theft of wages because the employer is
not given the value of labor in return. The freeloader is also depriving
other workers, who want to provide for their families by honest
exchange of labor for wages.

Let me give
you a personal example of what the French prime minister is trying
to achieve.

A few years
ago, I made the move from Norway to the U.S. The idea that I could
be fired with two weeks worth of wages was a bit scary. Not that
I had been fired from a job, but the idea that I had employment
at will was a change. If I showed up for work, I had a job. If I
did not show up without a good reason, I did not have a job.

This was a
month after 9/11 when the U.S. economy was in recession; I went
from a computer engineer job in Norway to a part time cashier job
at a retail store in Kansas City. I left behind a job with benefits,
retirement plan, and a salary for hourly minimum wages.

In a situation
where people where losing their jobs, Target Corporation took a
chance on this immigrant girl who had a weird Latin-named degree
from a foreign country, and who did not know the different coin
and note denominations of U.S. currency. If I had moved from U.S.
to Norway, I would most likely have been unemployed much longer
before I found a job. Two jobs and 12 months later, MeridianIQ in
Overland Park, Kans. offered me a salaried job with benefits. I
would not have been offered that job, if I had not already proven
my abilities to employers that hired cheap labor with high-risk
exposure.

The U.S. labor
market is more dynamic, and more open to employees with less experience
and lower value than any labor market in Europe. Where a Norwegian
retiree is limited to her meager savings and the monthly check from
the governments retirement fund, a U.S. retiree can work a few months
to save up enough money to visit grandkids on the other side of
the continent.

Where a Norwegian
graduate without valuable experience will receive unemployment because
no employer can afford the risk, a U.S. graduate can use entry-level
jobs with high turnover. The U.S. job has a high turnover because
the good employees get promoted into salaried jobs quicker.

Prime Minister
De Villepin is trying to introduce dynamism in a stagnant labor
market, by giving young employees a competitive advantage. French
students are throwing it back in his face, how dare he give them
an opportunity to increase their living standard!

March
20, 2006

Lene
Johansen [send her mail]
is the director of U.S. Operations of the Swedish think tank, Eudoxa.

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