Tuesday, March 21, 2006
A Lesson from "The Decline of France"
After posting about the substantially different job prospects for US and French college grads , I read this Wall Street Journal article on The Decline of France that draws an interesting lesson for the continued health of the US economy from the French job law riots. According to the article the recent widespread rioting is : "the latest symptoms of an ailing democracy.
The troubles began with student unhappiness about a new 'First Job Contract' law, adopted by the National Assembly two weeks ago. They grew into a protest movement once the unions joined in. A nationwide strike has been called for next Tuesday. The merit of the new law isn't the issue here. One can hate the new law as well as the tactics employed by the mobs to kill it. The bill is designed to reduce the youth jobless rate of 23%. But if France wants to reverse a 30-year pattern of low growth and high unemployment, it needs to tear down labor law barriers across the board, not just for people under the age of 26. .......
Yes, the banners of student groups add color to the street demonstrations. But look closer. The force with real bite is the public-sector employee unions. Blue-collar workers long ago abandoned the union movement, leaving civil servants who, like Charles de Gaulle once said of France's cosseted farmers, are desperate to hold on to their "mediocre but secure" posts.
The danger arises from the fact that the public sector does not have a natural economic 'fail-safe' control over excess union demands since the demands can always be met by increasing taxes. Private companies have a 'fail-safe' factor in their ability (neccesity really) to declare bankruptcy if they can't pay the demands. It creates sort of an economic mutual assured destruction aspect to negotiations that make it viable to reduce union demands or gains as preferable to no wages in a bankrupt firm.
The French lesson is that our government organizations need to maintain an equivalent form of legal leverage if we don't want to lose our competitive advantage as a dynamic economy.
The troubles began with student unhappiness about a new 'First Job Contract' law, adopted by the National Assembly two weeks ago. They grew into a protest movement once the unions joined in. A nationwide strike has been called for next Tuesday. The merit of the new law isn't the issue here. One can hate the new law as well as the tactics employed by the mobs to kill it. The bill is designed to reduce the youth jobless rate of 23%. But if France wants to reverse a 30-year pattern of low growth and high unemployment, it needs to tear down labor law barriers across the board, not just for people under the age of 26. .......
Yes, the banners of student groups add color to the street demonstrations. But look closer. The force with real bite is the public-sector employee unions. Blue-collar workers long ago abandoned the union movement, leaving civil servants who, like Charles de Gaulle once said of France's cosseted farmers, are desperate to hold on to their "mediocre but secure" posts.
The government workforce -- one-quarter of the population -- can terrorize the majority by stopping the trains or turning off the electricity. In other words, the state funds its own opposition, which torpedoes even modest efforts to modernize France. By marching with the public-sector unions to defend this status quo, the boys and girls of the Sorbonne are saying they want to be "mediocre but secure," too. What a dream for a 20-year-old. And a useful warning to Americans about the danger of giving public-sector unions too much power as well."
I didn't realize that the French union movement was so heavily dominated by public sector workers, after "abandonment" by blue collar workers. That is pretty much the pattern of union membership in the US as well. Union membership has been decling in the private blue collar sector while rising in the public sector. That makes the French problems a good early warning sign of potential problems here.The danger arises from the fact that the public sector does not have a natural economic 'fail-safe' control over excess union demands since the demands can always be met by increasing taxes. Private companies have a 'fail-safe' factor in their ability (neccesity really) to declare bankruptcy if they can't pay the demands. It creates sort of an economic mutual assured destruction aspect to negotiations that make it viable to reduce union demands or gains as preferable to no wages in a bankrupt firm.
The French lesson is that our government organizations need to maintain an equivalent form of legal leverage if we don't want to lose our competitive advantage as a dynamic economy.
