LONDON — France’s chronic malaise is marked by periodic explosions of protest. The two most recent episodes — the rioting and arson in French cities last autumn and the successful student campaign earlier this year against a new law governing young labor-market entrants — seem to have little in common. But their unifying thread is youth, unemployment and uncertainty about the future, as well as the suffocating state paternalism that underlies the wider malaise itself.
Take, for example, the desirable goal of job security. French governments have sought it in the only way they know — by ever more regulation. Unsurprisingly, rules that make it difficult to fire established workers discourage employers from hiring new ones. Insiders enjoy lavish protections, while entry barriers to the millions left outside are insurmountable.
As a result, unemployment is averaging 10 percent this decade and has not been below 8 percent for 20 years. And, while the overall level of unemployment has remained stable — albeit at a shockingly high level — the unemployment rate among young men (in the 16-24 age group) jumped from 15.3 percent in 1990 to 21.4 percent in 2005.
France’s benevolent paternalism penalizes the young beyond the labor market as well. On paper, wealth redistribution through high taxes and state transfers, reflecting Republican ideals of equality and social cohesion, has brought good results. Unlike most other countries in the Organization for Economic Cooperation and Development, where inequalities have increased over the last 30 years, in France pretax income inequality decreased slightly, or at worst remained stable, from 1970 to 2000.
But this aggregate stability masks shifts in income distribution that have favored older cohorts. Those around retirement age (51-65) saw their share in total income rise by three percentage points in the last 10 years, while younger groups, particularly those aged 18-25, lost ground, with their income share falling by five percentage points. By 1995, relative poverty was increasing sharply for young adults, while the opposite trend occurred among the elderly. In 1970, a quarter of all pensioners lived in poverty; today, the figure is only 4 percent.
Joblessness is the main cause of poverty, and the best protection against it is earned income, for which even France’s generous welfare payments are an inadequate substitute. Moreover, the high payroll taxes needed to finance these benefits constitute another deterrent to hiring, as does the high minimum wage, which tends to price unskilled labor above its potential productivity.
The relatively generous dole and the prospect of high taxes once at work merely reduces the incentive to take low-paid jobs. As a result, 40 percent of all transfers go to poor but able-bodied people of working age.
The full extent of the French system’s pathology becomes fully clear in the light of successive governments’ attempts at reform. Piecemeal measures are the norm, proving counterproductive on balance, or failing altogether. Minimum-wage increases, for example, counteract income-tax credits and lower payroll taxes aimed at encouraging youth employment. The unspoken premise is that there must be no losers, not even in the short term.
The logical answer would be to reduce equally the degree of job security enjoyed by the entire labor force. But no French government in recent decades has been remotely strong enough to face down opposition — often involving illegal action that goes unpunished — to any reduction in entrenched privileges.
Perhaps the only way out of France’s current impasse is the no-less traditional French route of revolution. According to this view, the system is unreformable, and real change will be possible only after it finally collapses, perhaps owing to fiscal weakness, since the combination of deficit-financed transfers, low growth, and low labor-market participation may prove unsustainable. After all, whatever the deeper causes of the French Revolution of 1789, the immediate trigger was a public-finance crisis.
The social strains of high unemployment — especially among young people — may force decisive change even before any fiscal meltdown. But evolutionary progress is always preferable to revolutionary upheaval, and despite all the difficulties of genuine incremental reform, the prospects are not absolutely hopeless.
This is clear from the remarkable recent experience of “Sciences Po,” one of the elite universities in the center of Paris. An ostensibly meritocratic competitive admission system is in fact monopolized by the socially privileged, who accounted for 81 percent of students admitted to Sciences Po in 1998 (compared to the roughly 60 percent of students at Oxford and Cambridge who come from fee-paying private schools).
The head of Sciences Po, Richard Descoings, implemented a program of positive discrimination that favors disadvantaged candidates, such as those from immigrant suburbs and rural areas, and charges increased fees to wealthier students. Descoings faced strong — and often cogent — opposition. But the dynamic of all reform is clinched when even weighty arguments succumb to the urgency of change.
For France as a whole, the long-term cost of withholding tough medicine will ultimately be much higher than the short-term pain of reforming the country’s fiscally unsustainable and spiritually impoverishing welfare state.
Young people in France will rediscover trust and hope when they can be shown a world where fairness exists not just in egalitarian redistribution but also in hard work and good behavior. Change for the better will be founded on the basic conviction that one should get what one deserves and deserve what one gets.
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