Anglo-American ideas to create jobs in France - FT

The latest initiative reflects a change of thinking across Europe about the best way to stimulate job creation. Previously, governments have focused their efforts on sustaining permanent, high-paid manufacturing jobs rather than encouraging part-time, lower-skilled employment in services. But Mr Borloo said yesterday that France could benefit from emulating the more flexible approach adopted in UK and US labour markets - as long as workers' rights were protected.

His move represents a further flexing of France's rigid labour market rules, which have been blamed for the country's high unemployment rate, stuck at about 10 per cent for most of the past decade. The government is already pressing ahead with plans to loosen the law enshrining the 35-hour week, providing greater flexibility for both companies and workers.

The market for domestic services has risen at an annual rate of 5.5 per cent over the past 15 years. According to government figures, 1.3m people are employed in such occupations. Mr Borloo said the market would continue to grow strongly as the population aged, forecasting that the sector could eventually sustain up to 3.5m jobs. He said the government would provide tax breaks for employers and welfare benefits and training for employees to encourage creation of more jobs.

As part of the jobs creation package, Mr Borloo announced the formation of a state agency to oversee the domestic services market. This agency will help to bring black market workers into the formal economy by offering them welfare benefits.

(via Marginal Revolution)

Let's start from the bottom paragraph. Evidently there are many workers in the domestic services market who have been able to dodge government regulations. By reducing regulation and creating enticements, the government is hoping to draw them out of the black market and be counted as employed. Let's check back in a year and see if the government counts those that already existed among the jobs it has created by correcting its mistakes of the past.

As for the first paragraph, how were the high-paid jobs being "sustained"? To some extent by subsidies, but that means government expenditures which must be financed ultimately by taxing labor or capital or both. That's counter productive.

And they were "sustained" to some extent by promotion of unions, wage controls, and mandated benefits (like the 35 hour week). These don't show up as government expenditures, but they are just as counter productive. When wages are pushed above the value of the worker, firm reduce employment. Those lucky enough to keep their jobs gain. Mandated benefits also reduce employment when their cost is not equal to the value of the benefits. And here even those who still have a job with enhanced benefits are worse off.

Sustained?

What's it all boil down to? The French government is planning to create jobs by getting of the way. The extent to which that will work depends on how likely it is perceived to be that they will stay out of the way.