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
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