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French Labor Market in Trouble

French Labor Market in TroubleFrench Labor Market in Trouble

France reported a 10.6% unemployment rate in April 2015, a shocking number for the second-largest economy in the Eurozone. By contrast, the EU-wide average is 9.8% and Germany’s is at an impressive 4.2%.

Compounding the emergency is the French youth unemployment rate: at least one in four people below the age of 25 are unemployed, with many of them moving between temporary jobs and internships, IEA reported.

The New York Times has dubbed the young and educated class who are struggling to find permanent jobs the “floating generation”. They are not paying taxes or owning property because the economy fails to integrate graduates into the workforce.

French unemployment has fluctuated between 8% and 11% for the better part of the last 30 years, suggesting labor market dysfunctions are pushing up joblessness. The causes lie with structurally ingrained aspects of the French economy. The labor market is rigid and difficult to enter with a system that makes it very expensive for employers to hire full-time employees as well as to fire them.

In 2000, the French government implemented the 35-hour work week limiting and infringing upon the productivity of workers. Overall, the economy is suffering from low output and paltry annual growth of less than 1%.

The Financial Times reported that North African and Middle Eastern refugees are actively trying to avoid settling in France due to its high unemployment rate, complex and long asylum application process and the rising influence of the xenophobic Front National.

Instead, the majority head to Germany and the Nordic countries where economic prospects are much brighter. There were only about 100,000 asylum applications, one per 1,000 local people, in France last year. Sweden had a rate of about 13 per 1,000.

In his last year in office before possibly running for another term, beleaguered President Hollande has been hit hard with the fight against terrorism and the failing economy. Last week, he pledged €2 billion ($2.19 billion) to subsidize small companies for hiring a young or unemployed person for 6 months or more and to fund a job creation plan through which 500,000 vocational training schemes will be created, which will simply remove half a million from the unemployment statistics.

Hollande addressed the inflexibility of the French labor market by saying, “The goal [of the job creation plan] is also more security for the company to hire, to adapt its workforce when economic circumstances require, but also more security for the employee in the face of change and mobility.”

Financialtribune.com