Some of you may be following the latest series of protests happening in France. The French government is seeking to change its employment laws to allow students getting their first job to be offered a contract with more limited employment protections. Students affected by this change, who already face significant unemployment rates of 23 percent and double that in some depressed urban areas, are up in arms about the apparently loss of job security that this change presents. An AP story can be found here: www.townhall.com/news/ap/online/regional/europe/D8GC0DBO2.html
My advice to these students: have a nice glass of California wine or an ice cold Coca-Cola to relax, enjoy some good Wisconsin cheese, and stop burning other people’s cars. (How is it that random destruction of other people’s stuff becomes an acceptable form of protest?) Once you have composed yourself, enroll in an economics course, or read one of the excellent books out there by people like Thomas Sowell or Milton Friedman.
You will soon discover that your government is trying to help you. Employers are more willing to give you a chance to prove yourself when they are not hampered by a long-term obligation to keep you on in the event you don’t work out. Being risk averse, and considering the significant costs of keeping on a person who turns out to be a slug, the employers must either pay very low wages or hire only those applicants that are virtually certain to perform. Given that minimum wage laws prevent the low-wage alternative, they choose the latter.
Restrictive employment laws end up hurting the segment of the labor market which is likely to have the lowest skill levels and prospects for employability. (Thus, it makes sense that the troubled urban areas, which are probably full of rather troubled young people, would have dramatically higher unemployment rates.) These young people might have a chance to prove themselves and show that they can indeed perform useful services if someone only gives them a chance to try. However, that chance does not come at all if substantial future cost burdens are attached.
In the academic realm in which I am employed, tenure creates these potential future burdens on employers. Though some of us may find tenure as a necessary protection from reprisals for our academic opinions (probably a greater risk for conservatives than for those of other political stripes), for others it simply protects them from the market consequences of modest effort. This explains, in significant part, why academics do not get paid as much as their counterparts in private industry. Unfortunately, the depressing effects of these burdens not only affect entry, but also compensation growth within the affected employee group.
Some might still find this security preferable, and willingly enjoy the trade-off in compensation. I'm all for choice in such matters. But we should think carefully about imposing this as a requirement in the legal structure, where choice is not permitted, particularly when the people harmed by it are likely to be those with the weakest prospects.
I doubt many French student protestors will read my blog today. For the rest of us, we should think about these principles the next time we contemplate imposing significant new burdens on employers. Those who think they are doing good by imposing these burdens should consider the effect on the weakest workers, who may not get the chance to try to prove themselves.