French winter woes

You wouldn't know it from the Christmas crowds packing the big Paris department stores near our office, but France is feeling poor this winter. The shortage of spending power has become a top theme in the presidential campaign. In a sign of the prevailing worry over rising living costs and sagging salaries, a BVA poll has shown that a surprising 48 percent of the French think that they might one day have to  live on the street.[Paris homeless picture]

So Ségolène Royal, the Socialist, has declared war on what she calls la vie chère -- the high cost of living -- and Nicolas Sarkozy, the centre-right champion, has started talking like a Socialist.

What do they propose doing to give the French more money to spend if they are elected next May ? They are going to cut the huge burden of taxes and welfare charges that soak up spending power and stifle the economy.

No. I'm just joking. They are really promising good old French remedies: more taxes, more welfare spending and more restrictions on the private sector. They are also both blaming Europe for France's woes. In Sarkozy's case, there are qualifications, but this is hardly the bold new leadership that the pair claim to be offering.

[Galeries Lafayette Christmas shopping]

At least the Socialists are no longer beating about the bush. François Hollande, the party leader and domestic partner of Royal, has just added flesh to her vague promises to switch more spending power to the lower and middle classes.

President Royal, he told Le Monde today, would cancel the reduction in income tax that President Chirac has wrought over the past five years and she would impose a new levy on earnings to finance retirement pensions.

And the Socialists will reverse the reforms to civil service pensions that Chirac's government forced through a couple of years ago. Hollande, who is playing bad cop to Ségolène's gentil flic, also promised to tax corporate stock options out of existence. "I know of no better weapon than taxation," he said. Hollande, by the way, is hoping for the job of Finance Minister in the Royal regime.

More surprisingly, Sarkozy has succumbed to seasonal cold feet. Gone is his disdain for what he used to deride as the "failed French social model" and his promise to perform une rupture with the past. With television pounding out stories on the homeless and the new poor, he came out yesterday as a born-again socialist who will protect France from the excesses of the free market. Yesterday, he used a speech in the rust-belt region of the Ardennes to identify his new enemy: "la capitulation sociale", or social surrender.

Listen to the following from the candidate who used to be the champion of free enterprise. "For 25 years, we have been faced with an insidious form of social surrender which has been justified by globalisation and Europe.... I am a liberal but I have the strength to say that there are abuses by financiers that are not acceptable... The religion of absolute free trade is a surrender...I do not accept that gangster bosses remain unpunished."

Like Royal, Sarkozy blamed the European Central Bank. The ECB is crippling Europe's industry by setting interest rates that keep the euro too strong against the dollar, he said. "We must keep a capitalism of heritage and family. That is the capitalism I want to promote. Not the one of pension funds."  Posing as the defender of "la France qui souffre" -- suffering France -- he promised to tax businesses which "disinvest and move jobs elsewhere".

Of course, this is all tactics. Sarko is desperate to court the masses and shake off his image as heartless enforcer and friend of the bosses. There is fine precedent for this. Chirac, his boss, won election in 1995 by turning himself into a leftist with his promise to "heal the social fracture" of France, And Royal is trying to to win back the working class vote that abandoned the Socialists for the extremes in the 2002 election.

Both are guilty of hypocrisy. They know that France badly needs tough medicine. They say so in private but they also acknowledge that they are wary of alarming voters.

Interesting evidenence of the split between the governing class and the people has just emerged from a survey of the French elilte. The Panel-on-the-web Institute sought the opinion of the people who are listed in the Who's Who in France directory. After adjusting the returns from 12,000 questionnaires, they found that 59 percent of France's most powerful and influential people -- 90 percent men, bien sûr --  want the country to engage in radical reform and 41 percent favour progressive reform.

Comparison is difficult, but surveys of France at large show that only about 20 percent want radical reform.  Ségo and Sarko are for the moment preaching to the other 80 percent.

Comments

[Jess]

It's always 'rupture' postponed, isn't it?

I fear they're both (all?) hoping that if they can just put off action that little bit longer, somehow France's economic problem will solve itself. All it does, of course, is make the final crunch – when, not if – all the bigger and more painful.

I'm personally convinced that we're looking at another revolution when all this finally comes to a head. If there's one lesson to be drawn from French history, it's this: Never bet on the Right guy.

[Edward Johns]

My knee-jerk reaction is that "social" policies stifle self reliance and initiative on the part of the individual. The first step to be taken in times of hardship is to run to the state, rather than for example working overtime or taking a second job then the individual has surrendered a great deal of independence.
Without wanting to oversimplify, surely a workforce with a reputation for commitment will attract direct inward investment and thus improve the employment situation in France?
I look forward to a barrage of contadictory posts!

[Kenneth Armitage]

Edward Johns, “”a workforce with a reputation for commitment will attract direct inward investment and thus improve the employment situation in France””. Sounds like a very reasonable comment and it makes sense but it needs qualification. To misquote, “It’s Employment, Stupid”, and when it comes down to politics it is the economy that sharpens people’s minds based on the premise that if they have a degree of security in employment with sufficient coinage in their pockets, in their bank balances and in their property, such that they can do what they choose to do when they might choose to do it, then they will feel contented and will vote for the incumbent party; and, when people are unhappy, when they feel that they are either being ignored or feel as if they are not moving forward with their lives, when they believe they are economically, socially and spiritually poor and unable to afford more than the basic necessities in life then they will feel disenchanted and will, necessarily, vote for change.

An economy based almost entirely on the service sector becomes, in fact, a consumer-driven society that relies completely on people spending whatever they earn in order to keep the wheels of that economy turning. It also means that in order to sustain this ‘merry-go-round’ of demand and supply that, with the loss of an industrial and manufacturing base, more and more products and goods must be imported thus increasing a balance of trade deficit and therefore an economic deficit. But this is unsustainable over the longer-term causing peaks and troughs in economic cycles sometimes referred to as ‘boom and bust’ scenarios. This is happening in the USA with a current account deficit for 2006 in excess of US$820 Billion.

Politicians are fond of telling us, as if we did not already know, and using the hackneyed phrase that, “there is no such thing as a job for life”, that people must train and re-train and be prepared to change career or profession and position and status in order to remain in employment. And yet these very same people are the ones who strive to retain power in government whilst not producing a national industrial policy so that young and old can be trained and re-trained to meet the growing demands of the nation and the rapidly expanding global market-place.

I suggest that what people really want is first and foremost a job with a good wage packet to enable them to be able to meet the needs of their family and maintain a decent standard of living. When people are meaningfully and gainfully employed, when they are earning and learning to support those needs and they have the opportunity to progress and grow with their community, region and country then there is more likely to be political, economic, social and technological stability. Conversely, when unemployment is rising, when jobs are being lost, when opportunity is moving to other countries and when economic conditions and taxation is high it leads to increasing instability.

As the American banker Louis B Lundborg suggested in 'The Voices of Business', ““If when a businessman speaks of minority employment, or air pollution, or poverty, he speaks in the language of a certified public accountant analyzing a corporate balance sheet, who is to know that he understands the human problems behind the statistical ones? If the businessman would stop talking like a computer printout or a page from the corporate annual report, other people would stop thinking he had a cash register for a heart. It is as simple as that—but that isn’t simple.”

[Edward Johns]

Thanks Kenneth for your very well-put comments. Am I oversimplifying again if I suggest that "meaningful and gainful" employment is only achievable by those who are "leading the field" in terms of world commerce -the old empires, including of course France and the UK have enjoyed long periods of prosperity based on their colonial exploits (or to be less euphemistic invasions). Now that we are no longer militarily pre-eminent I fear that we will have to compete with the up and coming nations. To compete will I fear mean working harder for reduced rewards.

[razatork]

There we go, the mascarade is on again, i love the expression "born-again socialist", i find it so relevant.

I'm still to find out wether the he short-sightedness of french politics is more due to politicians, journalits, or the general lack of political culture in the population. The fact that the next president of france(whoever that end up being) is incapable of speaking the truth to the people could prove very problematic.

This really is a throwback imo, because with the security thing, i though we were in some sort of a trend to stop bulls*itting the people, i guess i was wrong.

[Frank Schnittger]

Sarko seems to be pitching for the centre ground, and therefore runs the risk of disenchanting his more radical base. Sego seems to be focusing on consolidating her leftist base first - perhaps with a view to tacking to the centrist floating voter later on.

On balance I would favour the Sego strategy, on the grounds that the most committed voters also have the longest memories, and are more likely to influence other voters.

The floating voters in the centre ground, on the other hand, are the least committed, most disinterested in politics, least likely to vote, and probably most influenced by opinion polls and what the candidates say in the last few weeks and days leading up to the poll. They are probably best focused on therefore when a candidates base, or natural home constituency has been consolidated.

Sarko is paying the riskier game - going after the floating voter long before they are ready to make up their minds - or even to decide whether to vote. By neglecting to consolidate his own base beforehand he risks his base either not actively talking him up, or alternatively, even defecting to Le Pen or a Gaullist "spoiler candidate" from his own side.

On the other hand, Sarko needs to draw level in the opinion polls – and the quickest way of doing that is to appeal to centrist floating voters who are more numerous even if, ultimately, less likely to vote. Perhaps he thinks he can rely on his own side rallying behind him when faced with the alternatives of Sego or Le Pen.

If Sarko can stay within a few percentage points of Sego in the first round of the election he is likely to gain the greater proportion of the Le Pen vote that would become available if Le Pen is eliminated after the first round. That may be the time he will tack sharply to the right in order to mobilise the Le Pen vote in his favour.

All of this, of course, has nothing to do with what the candidates actually believe are the best policies for France. They’ll worry about that after they get elected!

[Kenneth Armitage]

Edward, ""meaningful and gainful" employment is only achievable by those who are "leading the field" in terms of world commerce" - again absolutely right and I would not disagree at all. The problem appears to be that in countries with former empires and colonies, for example Britain and France, those at the top and supposedly leading the field appear incapable of creating those meaningful and gainful employment opportunities through investment and entrepreneurship. Instead they and their companies find ways of off-shoring or outsourcing or exporting, whatever your choice of phrase, jobs to developing countries with much lower overheads. That might be a good business plan, in terms of increasing the 'bottom-line' and for the benefit of shareholders, but it does nothing for the country nor for those who have lost their jobs in the process. It is the primary reason for 25% of people in UK not benefitting one iota from the alleged economic growth in the last decade and the reason for the growing gap between rich and poor. Of course we have to compete and increase productivity.

For some years now politicians, directors and senior managers have shifted their stance of concentrating on profitability, to enhance the economic performance of companies and countries, to addressing the subjects of national competitiveness and productivity. Indeed, there are numerous websites given over to these subjects all of which appear to concentrate on how one might introduce measures to improve the performance and thereby increase the productivity of employees.

But, there is no mention of what directors and senior management can do to motivate employees through incentives and improved workplace conditions; no mention of how manages can address practices and procedures so that they can be improved or enhanced to encourage people to increase effort; and, no mention of how useful politicians can or might be in order to reduce barriers to productivity and economic performance. However, progress to improve productivity and competitiveness in order to increase profitability is in the hands of individual companies and organizations and there is little that politicians can do.

The Collins English dictionary tells me that productivity is, “the output of an industrial concern in relation to the materials, labour, etc, it employs”; meanwhile, the Concise Oxford dictionary tells me that productivity is, among others, “the effectiveness of productive effort”. It seems, even after the enormous advancements and improvements in technology and automation during the latter half of the 20th century, increases or improvements in productivity can only be achieved when employees work longer or harder, and sometimes for less, to increase the profit margin on, for example, a ‘widget’ or provide services to customers much more quickly, but perhaps not as effectively. In other words the mantra of producing more of the same for less with less.

To my mind that is only a part of the equation; there is little point in producing 5 million widgets at a cheaper price when there is only a market for 5000; there is little point in dealing with 500 customers in a week when many are unsatisfied with their treatment and take their business elsewhere; there is little point in producing more widgets if your sales and marketing people are not ‘out and about’ drumming up business; and, if your widgets are more costly or less reliable than your competitors then you are unlikely to sell more.

So, instead of just producing more widgets companies should be looking to design bigger, better, cheaper, more efficient, more effective, more reliable widgets than competitor companies and to do that require considerable investment in education and training. I cannot comment on the general academic system in France but the state education system, after decades of political interference, leaves a great deal to be desired and might explain why instead of mechanical, electrical and electronic engineers we turn out people with degrees in floor coverings, media studies or wall-paper hanging even Masters degrees in 'Chavism'.

I apologise for digressing but I might finish with a quote from Peter Drucker in 'Managing in a Post-Capitalist Society', ""I think the growth industry in this country and the world will soon be continuing education of adults. Nothing else is growing as fast, whether you are talking physicians, or engineers, or dentists. This is happening in part because things are changing so fast in every field of every business of occupation."

[Daisy]

Un ouvrier de Perrier coute 68 euros de l'heure en charges patronales. Un ouvrier de Vittel, 76 euros de l'heure.

[christopher muir]

Both Sego and Sarko are playing dangerous games. Before or after the election, there could be any number of international financial accidents - according to recent internet static the US dollar could crash and derivatives or private equity funds might fail. As an example of existing fragility, Thailand went crazy yesterday; the better French presidential candidate should come clean and describe his/her formula for withstanding any massive financial shock. After all, one of them might eventually have to pull all those nasty levers under extreme pressure tp maintain national financial stability.

[john gregory Flinn]

The extensive posts of Kenneth Armitage, and Edward Johns seem to concentrate on yesterday's notions of enterprise, and how they may "enhance the economic performance of companies" etc., etc.
They should look at the Mousetrap weblog where new industries, technologies and services are identified which I'm sure entrepreneurs in France and elsewhere are already active.
The website designers, developers and services are a good example of where western industry can progress - the languages, communications and common heritage are advantages.
Another area is development of Flash memory chips and the latest nanotechnology which is claimed to be faster and uses less power. Although Europe and USA will have competition from the far east here for sure.

These are the future, where true productivity increases can be achieved by manipulating machines and processes rather than people. Motivating employees has a place in the economy, but I feel socialists will see that as a dirty word - like competition!

Then there is that other great imponderable - exchange rates!
Pressure is on for China to revalue its currency, the Renminbi, which at a stroke would make western products and services more competitive.

Certainly education is a growing necessity
to understand where all tomorrow's opportunities might be.
Motivating students appropiately is perhaps a question to consider here.

[Robert Marchenoir]

Daisy, your figures seem to be wrong by a very wide margin.

The minimum legal wage in France is 8.27 € per hour. This is the nominal figure, which is neither what the employee receives, neither what the employer pays (one more example of the stupidity of the system).

What the worker actually gets is 6.49 €, once the so-called "employee's" social security contributions have been deducted.

If, as you write, Vittel had to fork out 76 € per hour on top of the nominal salary for the so-called "employer's" contributions, that would be more than nine times the nominal minimum wage itself!

We do have a problem with the cost of work, but it is nowhere near that mark.

Note that a significant portion of people in France are paid the minimum wage, and a very significant proportion of manual workers are in that case. So this cannot be the explanation.

If you want to have a very, very rough estimate of the cost of work for the employer (but you should check the precise data), the real figure is nearer twice the net amount the employee receives on his paycheck.

But -- and this might be the explanation for your figures, the social security contributions are reduced to a very large extent for staff who is paid the minimum wage.

The 76 € you quote is probably a monthly amount, and not an hourly one.

A simulation made by L'Entreprise magazine shows that, in companies with less than 20 employees, monthly social security contributions for the employer have gone from 80,78 € to 62,71 €, thanks to the latest exemptions, on top of a monthly nominal minimum wage of 1 254,28 € (specific conditions may slightly change the percentage).

If you want to simulate the charges for different types of companies, go here:

http://www.urssaf.fr/profil/employeurs/services/calculer/acces_direct_01.html

[robert furlong]

do the 48% of french who fear living on the streets consist primarily of french women? i haven't meet many women anywhere who don't have the fear of becoming a 'bag lady' lurking somewhere in their lower consciousness. if so, of course, this would mean that while few french males fear homelessness, virtually all french femmes do. this, in the same economy?? would this be a comment on the state of the economy, or rather a matter of chromosomal arrangement?? vive la difference !!!

[alexander]

Here in the Scottish Borders we could learn a little from French intransigence. Our main industry was hoisery and the production of fine cloths. In the 1960s the mill-owners colluded with their buddies in local government to keep away new sectors, such as electronics.

The colleges have taught our unique weaving skills to chaps from China and now even the more presitigous mills, such as Pringle, only have the "Made in Scotland" label sown on here.

It is sad to see the ghost towns where many families have fallen into a welfare trap plagued by hopelesness. The electronics companies did arrive, but took the subsisdies and ran. One US firm guaranteed the workers of Selkirk,"The future is so bright you'll have to wear shades". Two years later the young me and women were throwing shades at the directors as they pulled out.

To have an indigenous, highly skilled, organic industrial base would be so much healthier for our society as a whole. We are a small population in Southern Scotland, but I feel that an element of 'cockerel diplomacy' with sensitive tax and welfare reform could help us regain our standing.

Adam Smith was above all a moral philosopher. His sentiments have been hi-jacked by the grey rationalists.

So let us re-ignite an auld alliance - not in socialism, nor a Third Way- but the birth of a New Enlightenment. "Liberty, Fraternity, Equality"

[paul t]

perhaps the prospective candidates in the forthcoming election should think about the effects on employment of their actions.As an employer here in France who cannot influence policies with the vote I don't have I shall seriously consider redundencies if the employers' contributions rise again.Yes I could pass these on as I'm presumably supposed to do but I collect enough taxes etc on the states behalf & I've nearly had enough!