Of Free Love and Free Employment

They say that Napoleon feared the mob. As a young and impressionable artillery officer, he fired grapeshot into the Paris crowd to quell a working-class revolt in front of the Tuileries. Remarking on the incident, he said, "As usual I did not receive a scratch. I could not be happier."

French Prime Minister Dominique de Villepin no doubt envies young Boney's pluck and good fortune. Ten score and eleven years later, the cannons at state disposal shoot water, he has a less than pliable press to work with, and his popularity has suffered not so much a scratch but an evisceration. On March 18, over 1.5 million people (mostly students and union workers) protested in the streets, and on March 28 more than 2 million protested and a nationwide strike was called by union leaders. For the embattled Dominique, Napoleon's happy state of affairs has yet to appear.

De Villepin has acquired this guest of bad fortune by invitation. He has championed the contrat première embauche or CPE, a "first job contract" that passed the French legislature and is headed to President Jacques Chirac, who has said he will sign it. The CPE would introduce a two-year trial period for workers under the age of 26 during which an employee can be terminated somewhat at will. After the trial period, the employment contract is binding. The intent of this change in the law is to tackle France's 9.6% unemployment rate, which is almost 23% among younger workers (those aged 18-25).

Economists have frequently pointed to labor contract rigidities (such as restrictions on firing workers) as a major cause of employment reluctance among European businesses. As a result, while the U.S. and Britain bask in unemployment rates at or below 5%, the Euro area has a combined rate of 8.3%. In numerous articles over the past decade and in his book The Political Economy of Labour Market Institutions, French economist Gilles Saint-Paul explains the causes of such rigidities and the political difficulties involved in removing them. A key part of the problem is that "insiders" (those who have jobs) do not want to lose the protections (the rents, as it were) that they enjoy. This is one reason why De Villepin has made a discriminatory law removing the condition for younger workers only: to take on the entrenched older workforce who already have jobs for life would be far too ambitious politically.

A large part of the difference between continental Europe and the more dynamic economies of Britain and the U.S. is a basic cultural distinction: we see employment as a mutually beneficial two-way street between employers and employees while they see employment as the one-way Champs Elysees. But while the perception of the employment relationship may be cultural, the fact that employment is a two-way street of voluntary exchange is not; it is as unavoidable as the laws of physics or, for that matter, of supply and demand. Employer restrictions do not help employees if the employment contract is still essentially voluntary. It just makes the possibility of mutually beneficial exchange less likely. Looked at in another way, how quickly would a recent university graduate find work if she could not quit such a job for the rest of her life? Would she not want a trial period before committing to such a relationship?

The matching of employers and employees may be likened to lonesome teenagers looking for partners at a school dance. Both may find many partners interesting. Now suppose chaperons place the condition that if a boy dances with a girl, he must marry her (though she may leave the relationship at any time). Is it surprising that only the prettiest cheerleaders and the homecoming queen are on the dance floor? And who but only the desperados will be asking these girls for a little twirl and a life of matrimony hence? In essence, French students are acting like the ugly stepsisters who never get a second glance—but when they demand marriage as the condition of courtship, they only have themselves to blame.

Of course, for a country so self-absorbed in its appreciation for free love, this is a mystery. What holds for love holds for labor, freedom in one is like freedom in the other. The French have not just turned into prudes in their quest for a long-lasting relationship, they have turned into intolerant Puritans on the witchhunt to annihilate the possibility of freedom for others because of what they fear in themselves.

That France has become the European country which is most hopelessly incapable of labor market reform is, on the other hand, not a mystery. The French welfare state still makes French payrolls among the most expensive in Europe. The high minimum wage, another impediment to job creation, remains untouched. A mandatory 35-hour workweek, instituted in 2000, depleted productivity without creating employment by "sharing around" labor hours. In a GlobeScan 2005 poll, the statement, "The free enterprise system and free market economy is the best system on which to base the future of the world" was agreeable to 71% of Americans, 66% of Britons, 65% of Canadians and Germans, but only 36% of Frenchmen. Efforts by journalists to explain these issues away are thoroughly unconvincing. A country with such an anti-market culture seems doomed no matter what minor reforms are passed.

Napoleon had reason to fear the mob in a nation of such petulant entitlement. Student and union protests have contributed to the failure of many reforms in the past (1986, 1994, 1995, 2005) and led to the demise of Charles DeGaulle's government in the late 1960s. Prime Minister De Villepin sees the challenge of the mob and has the courage to meet it. Whether fortune will follow him in elections next year is far less certain.