Fairness or Efficiency?

Fairness or Efficiency?

The French Government faces a conundrum against the backdrop of globalization By Peng Shuyi

Since March, France has witnessed ongoing social protests. The large-scale Nuit Debout (Up All Night) movement is particularly eye-catching.

The protests arose mainly due to protesters’ dissatisfaction with the government’s proposed labor reforms. In recent years, France’s overall unemployment rate has reached double digits, while youth unemployment has consistently remained above 20 percent. Against this background, the French Government decided to amend the labor law, easing restrictions on working hours and layoffs and giving employers greater rights, in order to dynamize the rigid labor market, promote employment and boost the economy. However, as these measures undoubtedly weaken workers’rights, they aroused widespread protests, which later extended beyond opposition to labor reforms to other social problems caused by globalization and the country’s current political system.

Unsustainable pattern

France’s socioeconomic pattern is characterized by high wages, high welfare benefits and high taxes. This has effectively protected the interests of the working class, particularly the socially disadvantaged, but such protection is also regarded as excessive by its opponents. For instance, besides providing citizens with welfare benefits from cradle to grave, the French Government imposed rigid restrictions on overtime and employee dismissal. Requiring workers to put in extra hours without explanation is seen as violating the law, while dismissing someone requires not only sufficient reason but also high compensation. This pattern has thus been dubbed “French socialism.”

In the face of strong global competition, however, such labor protection measures have come under increasing pressure.

After all, nothing takes place in a vacuum. Statistics show that in France, the costs borne by enterprises when hiring staff—including employment benefits such as pension and medical and unemployment insurances—are much higher than those in Germany, Britain, or the United States, while the disparity between France and developing countries that have yet to establish sound social security systems is all the greater. The comparatively high labor costs for French businesses undermines their competitiveness. Since the 1990s, France’s economic development has gradually headed downhill partly for this very reason.

The rigid protection of workers has also discouraged businesses from increasing their headcount in France. Some companies have even moved to East European states and Asia to reduce labor costs. France’s labor market consequently ran into trouble, and high unemployment continued. Joblessness among recent college graduates has become endemic.

Against this backdrop, the French Government’s determination to revise the labor law in order to boost employment and economic development became inevitable.

In a dilemma

At the heart of the continuing social protests lies the question of how to balance fairness and efficiency. Many European welfare-state economies face the same dilemma. The root of the problem lies in European integration as well as globalization, the deepening of which enables capital to flow unimpeded around the globe. The nature of capitalism—the pursuit of ever larger profits—causes capital to move from developed regions with high labor costs to low-labor-cost regions, which eventually leads to mass unemployment in the former. To resolve the problem, developed economies have to reduce their labor costs to retain capital. Some European states, such as Germany, have adopted this approach.

As is widely known, Germany was one of the first welfare states in the modern world. Faced with rising unemployment at the beginning of the 21st century, however, the German Government launched the renowned Hartz IV reforms in 2003 to restructure the labor market by, amongst other measures, reducing employers’ social insurance contributions and creating lowpaid temporary jobs. The reforms enabled remarkable achievements and were hailed as a miracle for boosting employment. In the10 years following their implementation, unemployment in Germany, particularly among young people, remained at a low level compared with the rates in other EU member states. France’s reforms, by contrast, have stalled due to huge resistance.

Protesters clash with the police in a demonstration against the government’s proposed labor reforms in Paris, France, on May 17

According to statistics, France’s longterm youth unemployment rate is twice that of Germany, whereas social equity in France is reportedly better than in Germany. Behind Germany’s employment miracle, its poverty rate has risen. Currently, Germany’s rate of youth poverty is double that of France. Although temporary jobs have helped to reduce unemployment, they cannot provide young people with a stable income and, in some ways, have prevented them from gaining regular employment.

Protesters in France fear that they will suffer a similar fate as the working class in Germany; they are concerned that if the new labor law is put into effect, French society will give way to the unlimited pursuit of economic efficiency at the cost of labor rights, and labor protection will be reduced to a new low. Particularly difficult to swallow is the fact that the reforms have been brought forward by a left-wing Socialist government, as the French Socialist Party traditionally upholds egalitarianism, opposes economic liberalism and insists on safeguarding workers’ rights and social equity via wealth redistribution. Before taking power in 2012, moreover, the Socialist Party launched a strong attack on the previous right-wing administration’s welfare-cutting policy, which was also aimed at improving employment and boosting the economy, and vowed solemnly to place social equity at the top of its policy agenda. Now, however, the Socialist government has not only followed in the footsteps of the previous administration, but has also taken a tough, uncompromising stance, which has engendered even greater disappointment and anger among protestors. Accordingly, social protests have erupted to demonstrate dissatisfaction with the country’s political regime as well as the effects of globalization.

In reality, the huge economic and social pressures brought by globalization have greatly squeezed the Socialist government’s policy-making space. To boost employment and economic development, it has no better alternative other than the approach adopted by the previous administration. Before proposing labor reforms, it had already taken steps to adjust social policies, such as raising the mandatory retirement age and reducing allowances for low-income families.

As renowned French, left-wing ideologist Samir Amin has pointed out, in the context of globalization, the capitalist political system is evolving into oligarchy, and representative democracy is becoming a kind of lowintensity democracy. Amin argues that the freedom of people to choose their political representatives doesn’t really matter, since it is the market rather than the parliament that actually has the final say.

To sum up, balancing efficiency and fairness is a great challenge not just for the French Government but for all nation states. While it causes people in France to reflect, the whole world should also take the opportunity for introspection.

Drivers wait in queue to refuel their cars at a gas station in Paris on May 25, after anti-labor reform strikes caused a supply shortage of petroleum products in France