Does France's Economy Need to be Renewed

August 15, 2018

CEPR

That’s the question millions are asking after reading this NYT profile of France’s labor minister, Muriel Pénicaud. The largely positive piece refers to France’s “famously voluminous labor code,” then goes on to tell readers:

“The campaign to renew the French economy, one of President Emmanuel Macron’s flagship policies, involves steering toward a Nordic-style labor model known as “flexible security.” The changes aim to rebalance the welfare state by creating more flexibility for companies to hire and fire, while offering greater training and support to help workers transition to new jobs.”

This is of course how President Macron is describing his agenda. While the description may actually reflect his goals, it may also be a cover for a different agenda. France stands out among major OECD countries in limiting the growth in inequality over the last four decades.

Its economy has also not performed especially poorly. While it does have a high youth unemployment rate (which is cited in this piece), the number is deceptive. A much higher percentage of French youth choose not to work because university tuition is nearly free and the government gives stipends to students to cover living expense.

The share of French young people who are unemployed is actually very close to the rates in the United States, but it translates into a much higher unemployment rate because so many fewer French youth are working. For prime-age workers (ages 25 to 54), according to the OECD, France’s employment rate is actually slightly higher than in the United States, 80.4 percent in France, compared to 79.3 percent in the United States.

In short, France’s economy is not obviously in any sort of crisis. There are certainly ways that its economy can be improved with reforms, and perhaps this is Macron’s real agenda. However, it is also possible that he wants to bring about the same sort of upward redistribution in France that we have seen in other wealthy countries.

If that were the case, it is unlikely that Macron would announce an agenda for the purpose of giving more money to rich people. It is more likely he would have some cover, like modernizing France’s labor law.

It would be best if NYT news articles just reported on what politicians say and do and not try to tell its readers their real motives.