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Appendix: High Unemployment in France
In recent years, France has had an unemployment rate significantly higher than the
unemployment rate in the U.S.
Example 17: From 1991 to 2013, the U.S. had an average unemployment rate of 6.1%. During
this same time period, France had an average unemployment rate of 9.8%.
The unemployment rate in France is higher than in the U.S. not because French workers are
more likely to lose their jobs than American workers, but rather because unemployment lasts
longer in France than in the U.S.
Example 18: The majority of workers who become unemployed in the U.S. are unemployed for
less than 8 weeks. The percentage of unemployed workers who are unemployed for one year or
more is about four times as great in France as in the U.S.
The higher rate of unemployment in France compared to the U.S. is often blamed on structural
differences in the French labor market compared to the U.S. labor market, including:
1. It is more difficult and costly to fire workers in France than in the U.S. This makes French
employers more hesitant to hire new workers.
Example 19: In France, the administrative procedures required for a large company to fire a
worker take an average of over three months to complete. In the U.S., most workers are “at-will”
and can be dismissed immediately for any (or no) reason.
2. Payroll taxes in France are about four times as high as payroll taxes in the U.S.
3. Unemployment compensation benefits in France are more generous than in the U.S. and can
last as long as three years. In the U.S., unemployment compensation benefits typically last no
longer than six months.
4. The minimum wage has been higher in France than in the U.S.
Example 20: In 2014, France’s minimum wage was about fifty percent higher than the minimum
wage in the U.S.
In 2003, Forbes magazine published a Free Labor Indicator, ranking seventeen countries by
labor-market freedom. The U.S. ranked first on the list, with a Free Labor Score of 4.55 on a
scale of 4 (most free) to 40 (most restrictive). France ranked fifteenth out of the seventeen
countries ranked, with a score of 32.25.
In early 2006, the French government enacted a youth employment law creating a “first
employment contract”. The first employment contract would allow employers to fire any worker
under the age of 26 for any (or no) reason during a two-year trial period. The first employment
contract was intended to encourage employers to hire more young workers by making it easier for
employers to eliminate young workers in the event that a worker proved to be unproductive or if
there were a downturn in business.
It was hoped that the first employment contract would reduce the unemployment rate for young
workers, which was over 20% (around 50% for young immigrant workers).
The law creating the first employment contract proved very controversial and triggered
widespread protests. Opinion polls indicated that about two-thirds of the French people
disapproved of the first employment contract. The law was withdrawn by the French government
on April 10, 2006. The unemployment rate in France in June, 2014 was 10.2%. The youth
unemployment rate was 22.4%
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