Saturday, February 23, 2013

France: productivity and the union threat

Writing in the Financial Times, Howard Davies says that French-bashing is misplaced given the country's impressive productivity numbers:
Because the truth is that the productivity of French workers is not at all bad. The French do work fewer hours than most comparable nations. They work, on average, 16 per cent fewer hours than the OECD average, and 25 per cent fewer than the industrialised Asian nations. Yet their output per hour compares very well. A UBS study from 2009 showed that annual French output was $36,500 per head, compared with $44,150 in the US.  
But on average the French work 1,453 hours a year, while their American counterparts are clocked in for 1,792 hours. So on a per hour basis the French produce $25, and the Americans $24.60. Not a huge difference, perhaps, but it certainly does not suggest that French workers – while they are on site – are on a permanent coffee break, or drinking a ballon de rouge behind the bike sheds.
As is frequently the case with what one reads on the internet, the most interesting points are made not in the article itself, but the comments section, with at least a couple of comments noting that French productivity statistics are largely a product of incentives to replace labor with capital. William W. Lewis points out in his brilliant book The Power of Productivity (page 54) the role of France's high minimum wage:
In food retailing in the United States and the United Kingdom, a large number of workers paid at the minimum wage provide services such as bag packing, checkouts, floor cleaning and stock rotation not found nearly to the same extent in France. These workers have low productivity. They pull the average food productivity down in the United States and United Kingdom. If food retailing in France provided the same services, its productivity would decline by about 17 percent.  
France does not provide these services because the high minimum wage makes these services uneconomic to provide. Thus, the equivalent low-productivity workers in France are unemployed rather than workings as in the United States and United Kingdom. The same thing is true in all services that employ large numbers of workers near the minimum wage in the United States and United Kingdom. 
One other comment of note from the FT piece:
Last week French television showed a union representative explaining how his union "militants" had completely rigged an occupied car parts factory with explosives, ready to blow it up.

The comments from the union rep to the effect that "this is where we work and the factory is really ours. If the owners persist in closing it down, we will blow it up so there is nothing left to sell off" go to the very heart of everything that is wrong with the labour market in France. 
In the view of the unions, the primary role of a company is not to make money for its shareholders -perish the thought. No, it is first and foremost to provide jobs. At any cost and shareholders be damned. 
Imaging this same scene in Canada or the US: union reps threatening to blow up a factory, threatening to destroy shareholder property and showing a television crew how the plant has been rigged. These fellows would in short order be arrested under a variety of citations. Not in France, where the union mob rules and the current socialist government laisse faire.

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