The French labour market: more flexibility led to petrification and a poverty trap

According to INSEE, the French statistical institute, the French labour market became much more flexible. But it also became less flexible, according to the same study…

How to explain ‘Ces constats apparemment contradictoires?’

Apparently, more flexibility led to ever shorter contracts at the bottom of the labour market and therewith to segmentation and less dynamism, many people are increasingly trapped:

tout ceci suggère que le fonctionnement du marché du travail se rapproche d’un modèle segmenté, où les emplois stables et les emplois instables forment deux mondes séparés, les emplois instables constituant une « trappe » pour ceux qui les occupent

Grumpy update: yes, I can and do read french, albeit somewhat slowly, and more people talking about France should be able to do that.

Should this problem be solved by a more flexible upper half of the labour market? Hmmm… that’s the USA solution, a country characterized by extreme income inequality and loads of ‘working poor’. And when we look at the 1995-2014 period less than impressive job growth and a declining participation rate. I do not say that French labour market rules, habits and culture are perfect. But economists should stop analysing the labour market assuming a situation of full employment. But we we’ll first have to solve the macro-economic problems: mind that european countries with medium or, regionally, even low unemployment like Switzerland, Germany and the Netherlands have been able to fill the macro economic ‘spending gap’ with current account surpluses of 7 to (over) 10% and even this did not prevent a double dip in Germany and outright stagnation the Netherlands… Also and obviously not every country can have such surpluses at the same time. A ‘flexible’ labour market in a situation of high output gaps (look at the high rates of unemployment) is a totally different ball game than in a situation of full employment and will trap people into poverty.