Wednesday, August 29, 2012

2.3 Billion for Youth Jobs

Employment subsidies: Hollande has just announced 2.3 billion euros' worth. The money is earmarked for underskilled youth in the 16-25 age group. We have been this way before. The move is billed as a boost to French competitiveness, since it will reduce labor costs in some industries. But actually it doesn't reduce costs. It only transfers the costs to the state, meanwhile discouraging industry beneficiaries from investing in new, labor-saving technology to reduce costs over the long run while spurring employment among manufacturers of capital goods. In short, this is a bad investment. To be fair, youth unemployment is quite high, and this will provide some immediate relief. But similar measures have proved disappointing in the past, and there is no reason to think that this time will be different.


Anonymous said...

"investing in new, labor-saving technology to reduce costs"

Pretty ignorant comment by GoldHolder. France has been investing in automation, due to expensive labor, for over 30 years. Even then, parking lots did not have attendants to take your money--it was automated. Crap, we don't even have bagboys so we have to bag our own groceries; another way to investing in new, labor-saving technology to reduce costs.

carambar said...

"ignorant" is a too strong word my friend.
More of the same unfortunatly with this "new"subsidie. It show you how powerless goverment is. Only long term policies will have an impact, but we all know it does pay soon enough for politicians. a policy oriented toward small and medium companies will pay off, especially after the goverment only focused on "national champion" at great cost.

Anonymous said...

@carambar: Indeed and that includes autoentreprenerus currently under vicious attack by the protectionist minister for artisans. The short term focus of politicians will be the ruin of the country (but then what else is new?)

bernard said...

The fundamental thing to realize is that labor is heavily taxed in France and capital little taxed (compared to other advanced countries). Thus the capital/labor mix tends to shift permanently towards more capital intensive and less labor intensive activities, all things being equal. Shifting the tax burden, something governments can do both in the short and long run, would eventually imply a somewhat different capital/labor mix.