On today’s show we’re talking about what’s happening in France.
I spend several months a year in France and I used to manage a team of 110 people in France for several years. I understand a little about French culture, and it’s very different than we’re accustomed to in North America. Unlike in the US and Canada, the business environment in France is highly dominated by labour unions. In fact, any enterprise having more than 50 employees must have a works council. That is a union. Unions in France are incredibly militant. When I was managing a team of microprocessor designers, professional electrical engineers, I was surprised to see them on strike one day, picketing in front of the building and being interviewed by the evening news TV show.
The retirement age in France is 62. That compares with 65 in North America, and 67 in some other European countries.
The math is pretty simple. Demographics says that entitlement programs in most countries are under-funded when you fast forward only a few years into the future.
Mr. Macron wants to consolidate the country’s 42 different pension plans—each with varying retirement ages and benefits—into one universal system. Many civil servants, including teachers and rail workers, worry they could lose some of the advantages they enjoy under the current system.
The contentious proposal includes a system of bonuses and penalties to incentivize people to work until age 64, two years beyond the legal age of retirement of 62 years. Unions reacted by calling on workers to hit the streets. Workers are taking to the streets in droves virtually paralyzing the country. The latest estimate from the French Interior Ministry is that over 800,000 people participated directly in the protests. Even towns like Toulouse that have a strong manufacturing base with companies like Airbus manufacturing aircraft are seeing tens of thousands of protesters clogging the streets, bridges, and central squares. The largest protest in Paris was estimated at 65,000 people and turned violent at times.
The French are incredibly militant when it comes to protecting their social programs, regardless whether the math adds up or not. There is a feeling that somebody will take care of it. If I have a pension that’s been promised to me, then it’s not my problem. Somebody owes me my money. There is a sense of entitlement that is so deeply ingrained in the culture that anything that threatens any aspect of the an entitlement program is enough to bring people out into the streets in force.
But you need to understand why this is the case. The work environment in France does not favour entrepreneurship. If you’re an employee in France, if you work for a company for one year plus one day, you are entitled to two years of severance if they fire you.
In an environment where it’s very difficult to fire people, its also very difficult for people to get hired. So it has the effect of reducing mobility. When someone has a job, has an income stream, they become incredibly protective of it because their choices are perceived to be extremely limited. The loss of job, the loss of benefits, the loss of even one day of vacation per year is enough to trigger protests.
But just in case you think this is a France only issue, don’t be fooled. We have seen organized labour movements have a larger voice in the US than at any time since the 1980’s. We’ve seen more strikes by teachers, auto workers, and hotel workers than in decades. Public sentiment is much more favourable toward unions where they have a 64% favourable view in eye of the public according to a poll by the Gallup organization. That’s the highest it’s been in half a century.
I’ve long maintained that if you want to see your future, have a look at what is happening in Europe.