The Monitor takes a look at France and efforts to update their social model

As part of its ongoing series describing EU attempts to fit their social systems into a globalizing world, The Monitor turned its eyes toward France today. The article pulls few punches as it lays out current problems with the French social system:

"After more than two decades of jobless rates hovering stubbornly around 10 percent, France's chronic unemployment crisis 'is the one big problem with the French social model,' says John Martin, a senior official with the Organization for Economic Cooperation and Development. 'If a social model should deliver a satisfactory labor market,' says Mr. Martin, as European leaders gather outside London for talks about how to adjust their economies and social benefits, 'this one has failed dismally for the best part of three decades.'"

Of course, the second problem with France's social model is that its generous pensions require a robust (and growing) work force to fund the aging population. Unfortunately, the work force is not growing...and France is faced with a dilemma striking elsewhere on the Continent: where to find enough skilled workers to fill that void? In a rapidly globalizing world, living as a second class citizen in France probably doesn't appeal to many skilled foreigners looking for a new home to settle. Add in French 'issues' with religious expression and a xenophobic fear of culture erosion, and we don't find the most hospitable land, do we?

The Monitor article finishes up with an evaluation of the four different 'social models' currently operating within the EU:

In a briefing paper prepared for EU finance ministers prior to Thursday's Hampton Court summit, Mr. Sapir outlined the models, and argued that only the Anglo-Saxon and Nordic models are economically sustainable.

Anglo-Saxon - (Britain, Portugal, Ireland) This model features social assistance as a last resort. It's characterized by free markets, relatively less protection from firing, but vigorous measures to help unemployed find work. Health and other benefits are attached to employment, even for low-income jobs.

Many analysts say Britain has moved to an "Anglo-social" model, a hybrid of the Anglo-Saxon and Nordic models.

Nordic - (Finland, Sweden, Denmark, Austria, and the Netherlands) This model is marked by high taxes, and high spending on education, research, universal healthcare, child care, maternity leave, and welfare. It features less job protection, but higher employment rates than Continental and Mediterranean models. A strong social safety net lowers the risk of poverty.

Continental - (France, Germany, Belgium, Luxemburg). This social support model relies on state insurance-based benefits and pensions. Poverty is fought by protecting workers from being fired. Unemployment benefits are less generous than the Nordic model. Labor union membership is declining but still influential.

Mediterranean - (Italy, Spain, Greece) This model concentrates social spending on old-age pensions. It's characterized by strong protections against firing workers and generous early retirement plans. Unemployment and poverty rates are higher than other models.

The Bruegel study (from which the information on the four models above is drawn) is actually quite a bit more blunt in its analysis of the social models within the EU:

Europe’s labour and social institutions need urgent reform if we are to grasp the opportunities offered by globalisation and avoid the threats. But the notion of a single “European Social Model” is largely unhelpful for thinking about reforms. Of the four main models operating, the “Nordic” and the “Anglo-Saxon” models are both efficient, but only the former manages to combine both equity and efficiency. Critically, the “Continental” and “Mediterranean” models, which together account for two-thirds of the GDP of the entire EU-25 and 90 per cent of the GDP of the 12-member eurozone, are inefficient and unsustainable. These models must therefore be reformed, probably by adopting features of the two more efficient models. These reformsmay also involve changes towards more or less equity.

Surely not music to French ears. Or perhaps worse than not being music, not FRENCH music....

On a completely separate note, I've got big plans (BIG PLANS!) to write a more definitive entry on the so-called Nordic system. I'm not sure if it's an easily copied example because there are unusual circumstances - at least in Finland (a quarter of GDP provided by one high tech company) and Norway (floating on a sea of oil) - that allow a greater degree of social spending than is possible in more complex economies. Then again, I'm not an economist so I might just be talking smack. Ah...the joys of blogging! This pulpit is GREAT!

Tags:

France
Globalization
Social Reform