French students' folly ... why le CPE is good for them!

france.gif It really is ironic. From nearly all sides the French government has been critisized for not acting to reform France's rigid labour market which is to blame for a structural unemployment rate of 10% again making it difficult for France to get out of the current economic slump the country has been experiencing for nearly 10 years. The case in a nutshell is that it is too expensive for a company to fire employees which essentially means that they are not hiring. Basically the companies in France do not have the opportunity to regulate their workpool without paying loads of mandatory expenses, the result; as said above, an uemployment rate of about 10%. 

The response from the French government so far has been to create special contracts for companies and employees which enable companies to fire workers "free of charge" under specific conditions. The first of these contracts (le CNE) which was enacted last year enables small companies (under 20 employees which constitute 96% of the French companies) to hire and fire more freely than under traditional rules. 

The latest of the government's initiatives is a new contract (le CPE) which are set to address the hugh uemployment rate among young people of 22%. Where le CNE went largely uncommented this contract has prompted huge demonstrations by students in Paris.

"Barricades, several deep across the cobblestones, block the entrance to Paris's Sorbonne University. Fleets of riot-police vans line the surrounding roads. “We will get only what we know how to take,” declares the graffiti sprayed across the wall. Many students think it is May 1968 all over again.


Their principal grievance is the contrat première embauche, or first job contract, devised by Dominique de Villepin, the prime minister, for those under 26. It would allow employers to shed workers without justification, though with notice and some compensation, during their first two years. After that, employees would be protected under the same terms as standard permanent job contracts."

There are two important aspects here

1. Starting off with the obvious it is clear that the students' objections are misplaced. These contracts might not solve France's problems immediately but they are a step on the way to create a more flexible labour market which is something France is in dire need of. Caroline Blaum from Bloom has all the relevant arguments on this.  

"Faced with the prospect of graduating from college and entering the labor force, most young men and women want to maximize their chances of getting a job.

"Not the French. French students took to the streets last week to protest a law that would increase their chances of finding work. Yes, you heard it correctly. They are protesting a new law, enacted by Parliament on March 9, that would allow companies to fire workers under age 26 without cause or financial consequence within two years of hiring. The flip side of the coin -- that companies might actually hire a few more folks if they had greater flexibility -- seems to have gone right over the young tetes des eleves.

It's also gone over the older heads of the labor unions, who -- no surprise -- are supporting the misguided students."

2. The more subtle point about this conflict also mirrors a major structural problem in France. The traditional relationship between state and civil society is one of distance and lack of dialogue particularly in the legislative phase. The state acts in a dirigiste manner which basically leaves civil society with demonstrations and strikes as the only way to voice their diasgreement. In this case it is the right to lifetime employment which is violated and France's young people feel alienated and enslaved by this new law; oh come on!

Moreover and also more contextual I believe the current French government itself in part is to blame for this, but ironically enough this has less to do with Villepin whose entire political life underpins this new law than you might think Enter the real victor of this; Nicolas Sarkozy. We all remember the riots in france (here and here) and how the interior minister spoke of the young people in France. With Villepin putting his entire political effort into this as well as the coming elections I suspect Sarkozy is gleefully enjoying the show and in general it will be interesting to see how long this can go on before Villepin has to default and resign.   

In the just published The Economist, the magazine lavishes (some kind of) praise on Villepin;

"Above all, Mr de Villepin's new contract introduces an essential principle that is now largely absent from the labour market: that if it is made too hard to fire people, employers will not hire them in the first place. The prime minister may yet back down, like so many of his predecessors, in the face of continuing protests. But if he holds firm, and the new contract turns out to be popular with employers, it might then be extended further up the labour market, with benefits all round."

I can only join the choir, but I fear that Villepin's swan sang might very well turn into to his end; a situation which I am sure a seasoned poet is able to see the irony in.