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August 05, 2005


Abiola Lapite

It's a very good point, and one that is accentuated by the fact that the fear of hiring bad workers pushes French employers to invest more in productivity-boosting equipment for those who have jobs than they otherwise might have: it's cheaper to over-invest in labor-saving gear than to take on a dead-weight worker you won't be able to get rid off for 20 years.

Abiola Lapite

By the way, Gary Becker and Richard Posner also have quite a few critical things to say about Paul Krugman's ridiculous article. Unemployment is always easier to tolerate when someone else has to carry the burden - especially when that "someone else" is voiceless, foreign-looking, and banished to the fringes like France's banlieu-dwelling Beurs. It tells you a great deal about the mindset of many on the left that someone like Krugman, who must be well aware of the realities on the ground in France, could still see fit to turn out such rubbish.

Frank McGahon

There's something to Becker and Posner's arguments but they have waded into the poverty/alienation-causes-terrorism swamp and I thought this from Becker, on how the UK experience was "disturbing" to his thesis was far too casual, not to mention plain wrong:

However, the British experience is somewhat disturbing to this thesis, for Great Britain is at least a partial counter example to our analysis. For British labor markets are very much like those in the United States; in fact, Britain has lower unemployment rates than the U.S., has equal labor market flexibility, and provides above ground jobs for Muslims and other immigrants.

I believe the main reason for the difference with the United States is that new immigrants are easily accepted in this country since it is a nation of present or past immigrants. Foreigners of all kinds have never been so welcome in Britain, and are even less welcome in continental Europe. So even under the best of economic conditions, immigrants in Europe do not easily integrate into the general society.

If this were so, you'd expect to see Muslim alienation echoed among all other immigrant communities, which you don't. This just isn't going to fly. There is a narrower point in there about Britain which is that the welfare system in the UK allows young muslim men who are already inclined to be alienated to become further detached from society. By not requiring them to go out and work, they can spend the day poring over the Koran and indulge their millenial fantasies if they want. But this isn't even a necessary condition for fanaticism, given the employment status of some of the recent bombers, never mind a sufficient condition.

Abiola Lapite

Yes, the "poverty causes terrorism" thing isn't at all convincing, even coming from Richard Posner. Still, the situation in France isn't one anyone ought to be cheering on: quite apart from worries about terrorism, having so many young men of Arab origin indolent is a recipe for lots of crime and racial polarization. The venom towards Arabs I've seen issue from otherwise decent French people I know is really something to behold.


nice thesis but i doubt that he has emprically proven his total point. Clearly I would accept some of it: the workers in Dublin's retail sector are atrocious , often slow , and bad mannered - because they are not afraid of losing their jobs.

However labour shortages , even if artifical, can increase labour producitity in manufacturing at least - by promoting capital investment. Capital investment is the real reason we are getting more productivity per worker over time, people are not evolving to be better, smarter, and more productive.

( oh yeah I see abiola made some of these points, but I am posting anyway).

Frank McGahon

Huh? The point is a simple matter of logic which I thought he had explained quite clearly - if you have higher unemployment and if those who are unemployed are likely to be the less productive among the workforce (a reasonable assumption) then productivity as measured per hours worked is going to be overly flattering. Thus, Krugman and all other Franco-boosters are wrong to use this one data point (while conspicuously ignoring other more relevant points) to conclude that, say, the USA has something to learn about labour regulation from France. If productivity per hours worked was any kind of measure of economic health, we'd all be rushing to sack the least productive members of the workforce and put them on the dole.


Productivity in any economy has very little to do with the quality of employee - it is generally a question of mechanisation with the exception of craft industries ( like design, some engineering etc.). Productivity in retail is increased if you allow customers to shop for themselves, a la automatic vending machines and/or supermarkets.

There is no empirical evidence that the best employees are employed in France in any case - that was pure conjecture, a just so story, and assumes that the hiring market is perfect, which it clearly is not.

For all we know France has a lot of under employed, or unemployed young graduates who may be better workers than many older employees who got their entry into the market in the good decades and can not now be fired.

Frank McGahon

Eoin, the point is rather narrow - productivity measured per hours worked is not a reliable indicator of economic health. That's all. The thought experiment explains that fairly clearly. Point being, it's no use being super productive per hour if only 52% of you are out working (and only working 35 hour weeks) compared to 48% not working . Far better to have 63% (working longer hours) even at slightly less average productivity per hour (because even the lower productivity workers are being productive at something instead of sitting on the dole) compared to 37% not working.

Now, even in the unlikely event that, as you suggest, by some fluke the productivity of France's unemployed is significantly greater than that of its employed - this hardly reflects well on France's economic model either. I don't know why this is so hard to grasp, unless you start with an a priori committment to defend the French "social model" come what may, reason and evidence be damned.

Rafe Champion

Carping critics of the proposed deregulation of the labour market in Australia say it will undermine average productivity. Sure, we want to increase productivity but the idea is to give employers a chance to put on people who lack the skills, experience and motivation to be employable at the current minimum rates.
So what if average producivity falls, there will be more total production, some people will get a productive purpose in their days, the welfare bill will decline, etc.
On the topic of wages and industrial relations, lets hear it for the late Bill Hutt.

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