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France must work harder or stagnate, report warns

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France must work harder or stagnate, report warns

Old 10-20-04, 03:28 PM
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France must work harder or stagnate, report warns

http://www.iht.com/bin/print_ipub.ph...ss/euecon.html

By Katrin Bennhold International Herald Tribune
Thursday, October 21, 2004


PARIS France must undertake a radical overhaul of its labor market or face irreversible economic stagnation, Michel Camdessus, former head of the International Monetary Fund, has said in a report.

The report, released on Tuesday, was commissioned by the French finance minister, Nicolas Sarkozy, in May and touches on everything from the national education system to the need for more technological innovation.

But the key to unlocking faster expansion is allowing people to work harder, it says.

While few economists disagreed with the main findings of the report, some feared that its recommendations would be ignored, as have others before them.

Members of the opposition Socialist Party went further, accusing Sarkozy of using the report as a distraction on the day that a controversial debate on the 2005 budget began in Parliament.

Attacking France's 35-hour workweek and high minimum wages, Camdessus warned that if the government did not act, the effects of an aging population would be enough to trim the economy's growth potential from an annual 2.25 percent to 1.75 percent over the next decade.

France, Camdessus said, must cut its "work deficit."

"We are surreptitiously engaged in a process of stagnation," Camdessus wrote in the report.

"If nothing is done to overcome the pernicious phenomena that we have observed, in about 10 years it will lead to an irreversible situation."

Economic growth in France has lagged that of the United States on average by one percentage point every year over the past decade, as a combination of the shortened workweek, high unemployment and early retirement curbed the amount of time the French spend at work.

And as people live longer, the state-funded health and retirement systems are coming under increasing strain.

Successive governments have pledged to lower the unemployment rate, which has not fallen below 8 percent for two decades.


But the changes made by politicians have so far not been bold enough to address the root of the problem, Camdessus said.

"A serious syndrome of denial is setting in which curbs all but superficial reforms," Camdessus said.

He suggested that the French government allow companies and workers to agree to individual overtime rules, reduce the rate at which the minimum wage increases, and permit retired people to work while receiving a pension. Camdessus also suggested that companies' payroll tax bills should be determined in part by how they treat their employees: Those employing more people on temporary contracts or laying off large numbers of people should pay more, he said.

The proposals were immediately welcomed by Sarkozy, who is taking over next month as head of the governing Union for a Popular Movement party and may run for president in 2007. He has hinted that he wants to base the party's economic platform on Camdessus' report.

"I identify with this report because it makes three key points: It is urgent to carry out reforms in our country, reforms are not to be considered a punishment, and the number of state employees can be reduced in exchange for productivity gains," Sarkozy said.

But economists dismissed his rhetoric as early electioneering.

"We've had reports like that for 20 years, and for 20 years they've been put in the drawer," said Marc Touati, chief economist at Natexis Banque Populaire in Paris.

"The problem is that politicians want to win elections in the short term and real reform takes longer than that."

Past attempts at reforms of the retirement system and parts of the unemployment system have brought the government of President Jacques Chirac little popularity.

His party suffered embarrassing defeats earlier this year in regional and European elections in which the Socialist Party won landslides.

According to Eric Besson, the Socialist Party's economics and employment spokesman, the timing of the report suggested it was not about reforming France, but about providing a distraction from uncomfortable debates in Parliament.

"It's clearly politically motivated," Besson said. "He ordered the report for the day the budget debate starts in Parliament."

Sarkozy, who plans to quit the government at the end of next month to head the ruling party, commissioned the report in May, saying "this weakness of growth, which is affects the euro zone as a whole, has boosted unemployment and undermined public finances."

"This situation reflects certainly the ups and downs of growth, but I believe it also shows the limit of our growth model at a moment when other areas of the world are showing an impressive economic dynamism," Sarkozy said at the time.
I think everyone going on vacation in Aug. and global warming(causing hot summers) may take care of the "living longer" part of the problem.
Old 10-20-04, 03:31 PM
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they have 2.25% growth and an 8% unemployment and they refuse to do anything about it? If this was the situation here, a lot of people would be voted out of office.
Old 10-20-04, 03:33 PM
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Sacre Bleu!!!
Old 10-20-04, 03:49 PM
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coup de grace
Old 10-20-04, 04:06 PM
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I read the title as "France must work harder to stagnate"
Old 10-20-04, 04:17 PM
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You would think that with 4 weeks off a year and a 35 hour work week that things would be booming. Truly a suprise.
Old 10-20-04, 04:36 PM
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I wonder how bad stagnant Frenchmen would smell
Old 10-20-04, 04:38 PM
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Originally posted by weargle
I wonder how bad stagnant Frenchmen would smell
Go ask the Redundancy Department of Redundancy.
Old 10-20-04, 04:48 PM
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al_bundy,

We have economists playing with the numbers so you never really know what's going on. Maybe France should take a hint in that dept. Confusion is your ally.
Old 10-20-04, 05:19 PM
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Oddly enough, I read a report on productivity from the International Labor Bureau a while back and the most productive workers (GDP per hours worked) in the world were, not the Japanese, not the Americans, but... the French. Which means that they have chosen to use (part of) that increase in productivity to increase leisure (work less) instead of income (work more).

Over the last 30 years, productivity growth has been much higher in Europe than in the United States. And productivity levels are roughly similar today in the EU and in the United States.

The main difference is that Europe has used some of the increase in productivity to increase leisure rather than income while the United States has done the opposite.

Soaring productivity

The stability of the U.S.-EU gap in relative income on a per capita basis comes from the decline in hours worked. To be specific, in the United States, over the period 1970 to 2000, GDP per hour increased by 38%. Hours worked per person also increased, by 26%. Thus, GDP per person increased by 64%.

In France, over the same period, GDP per hour increased by 83%. But hours worked per person decreased by 23% so GDP per capita only increased by 60%.

Choosing leisure

Viewed in that light, the performance of France and of the European Union in general does not look so bad. The EU had a much higher productivity growth rate than the United States. And the EU countries chose to allocate part of those gains to increased income and part to increased leisure.

True, unemployment has increased and is too high. But most of the decrease in hours worked per capita reflects a decrease in hours worked per worker rather than higher unemployment or lower participation.

This choice, however, does not suggest that a deep and wide-ranging reform process is not taking place in Europe. As a matter of fact, this process is driven by reforms in financial and product markets. Reforms in those markets are, in turn, increasing pressure for reform in the European labor market as well.

Significant reform in the European labor market will eventually take place, but it could not happen overnight and not without political tensions. These tensions have dominated and will continue to dominate the news. But they are a symptom of change not a reflection of immobility.

Last edited by eXcentris; 10-20-04 at 05:23 PM.
Old 10-20-04, 05:30 PM
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Productivity growth isn't the same as productivity. It's how much it has increased and it could have started from a very low level.
Old 10-20-04, 05:40 PM
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Originally posted by X
Productivity growth isn't the same as productivity. It's how much it has increased and it could have started from a very low level.
You're right. I should have mentionned that the article I posted (which refers to productivity growth) isn't directly tied to the comments I made in my 1st paragraph about productivity (GDP per hours worked). That's something I'd read in the paper a while back. I tried to find the info/rankings online but coudn't find anything. I stumbled upon the article I posted while searching.
Old 10-20-04, 05:41 PM
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I heard this a while ago. I was listening to a French economist on the radio earlier this year and he was basically saying that France simply cannot survive if it continues its current work ethic (basically what this article tells us). Callers phoned in complaining that Americans focused too much on work and their careers though.
Old 10-20-04, 05:45 PM
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It's still interesting to see the different approaches to work in different societies though. The US is much more work oriented and Europe/Canada are much more leisure oriented. I remember a few years ago there was a beer commercial (Bud I think) shown in the US and Canada. It showed steel mill workers finishing their work day and going for a beer afterwards. They had to change the commercial in Canada because it didn't work at all. So instead of steel mill workers they showed a bunch of people having a beer after a day of skiing.
Old 10-20-04, 06:01 PM
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Economic growth in France has lagged that of the United States on average by one percentage point every year over the past decade, as a combination of the shortened workweek, high unemployment and early retirement curbed the amount of time the French spend at work.

And as people live longer, the state-funded health and retirement systems are coming under increasing strain.
Longer life expectancy, early retirement and government funded healthcare are not the recipe for a healthy economy.
Old 10-20-04, 10:23 PM
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Originally posted by kvrdave
You would think that with 4 weeks off a year and a 35 hour work week that things would be booming. Truly a suprise.
Why is that a surprise?

Australia managed to escape the last worldwide recession and achieve record growth during it. And we have 4 weeks off a year (rec leave) + 2 weeks worth of paid public holidays AND a 38 hour week.

Admittedly we could be different from some of Europe in that our 38 hour working week IS usually a 38 hour working week. Not a 25 hour week and 13 hours sitting around the water cooler.
Old 10-21-04, 12:23 AM
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You'd think with all that free time, they could spend 10 minutes a day taking a shower.
Old 10-21-04, 03:00 AM
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The US is much more work oriented and Europe/Canada are much more leisure oriented.
Canada has U.S. work-orientation and European wages. The worst of both worlds.
Old 10-21-04, 03:02 AM
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Australia managed to escape the last worldwide recession and achieve record growth during it. And we have 4 weeks off a year (rec leave) + 2 weeks worth of paid public holidays AND a 38 hour week.
Why is that not a surprise, seeing as Australia tightly controls who can live and work there?
Old 10-21-04, 03:38 AM
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Originally posted by Breakfast with Girls
I read the title as "France must work harder to stagnate"
I read it as "France must work harder on stargate."

Yeah, it's late.
Old 10-21-04, 09:55 PM
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Originally posted by DivxGuy
Why is that not a surprise, seeing as Australia tightly controls who can live and work there?
?? I would have thought it was no more or less tightly controlled than the USA or UK (and probably the rest of Europe). Of course, I could be wrong but from what I've seen we're happy to welcome most people (obviously as long as they can support themselves).
Old 10-22-04, 04:09 AM
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Originally posted by kvrdave
You would think that with 4 weeks off a year and a 35 hour work week that things would be booming. Truly a suprise.
In France you get more than 4 weeks off
It's more like 5 or even 6. Depends on the company.

Very few company truly applies the 35 hour schema. Because it is simply not possible. Like everywhere people work something like 40 to 45 hours/week (but paid 35 )

Germany which is "arbeit arbeit" (working) focused has deep trouble at the moment. France is doing well compare to them.

And even if you do not like the social model it does not prevent France to have some of the best and most profitable companies in the world....
Old 10-22-04, 04:18 AM
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Originally posted by naughty jonny
(obviously as long as they can support themselves).
I think that is the key right there.

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