Hamish McRae: France's challenge: create more bad jobs

France's problem is not just high unemployment, it is people who never get into the workforce at all
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France needs more bad jobs - but she also, like the rest of us, needs to figure out how to make bad jobs better.

To argue that countries need bad jobs as well as good ones sounds almost sacrilegious. Has the West not spent nearly 200 years trying to improve the lot of working people? The Factory Acts in the UK and their equivalent in other developed countries reflected a widespread appreciation that many of the jobs created by the industrial revolution were terrible and the state needed to regulate them. That set in train progressive government intervention in the workplace, leading in Britain to the present health and safety regulations and in France to the 35-hour week. Restrictions on dismissing people are all part of this long path towards improving the terms under which people work.

In many ways this is admirable. But the more you regulate the job market, the more you encourage employers and would-be employers to hire as few people as possible. The work still has to be done but employers use as much technology as they can to replace people. When they cannot replace people, they hire highly skilled ones because they can do the job faster. Sadly, not everyone is highly skilled, and it is the less-skilled that don't get jobs at all.

I don't know to what extent the unrest in France can reasonably be attributed to lack of jobs in the zones chaudes on the outskirts of cities. Other factors such as race and religion are at play. But one of the key differences between the French and British job markets is that we have become very good at creating lots of lowish-skill jobs in the service industries. We have been so good that we are sucking in workers from the enlarged EU to do them: roughly half of the increase in the supply of labour in recent months has come from eastern Europe.

Those people have not gone to France partly because it has not opened its job market to the new EU states in the same way as we have. But there is another reason. France has not been good at creating those jobs, with the result that her own less-skilled citizens are in effect excluded from the workplace. So France's problem is not just one of high unemployment, which at just under 10 per cent is more than double the UK's. It is of "never employment" - people who don't get into the workforce at all.

Thus the UK has 72 per cent of the people of working age in jobs, the same as the US and actually a little lower than Scandinavia. But the "big three" eurozone economies, Germany, France and Italy, have only 62 per cent in jobs. Professor Stephen Nickell, the economist now on the Bank of England monetary committee, cited these figures at an Economic and Research Council conference at the British Academy last week. In it he noted that the UK had succeeded in getting lower-skilled people into work partly because we had a deregulated service sector, partly because of lower taxes on labour, and partly because we did not have such stringent employment protection legislation as much of the eurozone.

In a way, this ability to create lots of service sector jobs is the flip side of the UK having lower productivity than France, something that concerns the government. France uses its labour very efficiently, not just by UK standards but even by US ones. I would not want to denigrate that achievement. At its best the French economy is wonderfully efficient, with people on average working among the shortest hours in the world and sustaining an enviable lifestyle as well. But most people in jobs do work ferociously hard while they are at it, as anyone who goes to a French family restaurant will have noticed. Besides, an economy where a large chunk of the country is working very hard - though for short hours - while a smaller chunk is not working at all, is not one designed for social unity.

The pressure on the less-skilled workers throughout the developed world is going to get worse. That is because our less-skilled people increasingly find themselves competing against lower-waged workers in eastern Europe, and more particularly in China and India.

We are still in the early stages of a great rearranging of the world economy as a result of the communications revolution. At that same conference, Professor Nick Crafts of the LSE noted that offshoring of business services - payroll, IT, software development etc - would increase 20-fold in the next two years. India, China, Malaysia, the Czech Republic and Singapore were the top five locations. Typical cost savings: 20-40 per cent.

If that sounds scary we can console ourselves that not all service sector jobs are vulnerable. We are not going to shift our estate agents to Shanghai - though, come to think of it, the Chinese property market may become a great market for our property expertise.

There are 96 million service sector jobs in the US but of these only 14 million are thought likely to be shifted overseas. I have not seen any estimates for the UK but proportionately that would be about 3 million - mind you, that is quite a lot.

So what is to be done? To try to stop offshoring would be to deny both sides of the trade huge welfare gains. These gains in the US are estimated by McKinsey to be equivalent to 17 cents on every dollar spent. Indeed to carry on getting richer we have to carry on shifting jobs to lower-wage economies, while figuring out ways of charging more for our own services. Above all, we must create the new service sector jobs to replace those we lose.

How? Well, the market will create those jobs. We know that from British experience. I am not worried about that. What concerns me is how to make the bad jobs better. That surely too is another challenge for France and the other big three eurozone economies.

It is never going to be hugely satisfying to wash other people's cars - indeed it is surely much more fun to burn 'em. It is never going to be a "good" job to housekeep in a hotel. I suspect being a security guard is not very satisfying though I know of some great acts of heroism by guards - things that really humble you.

That leads, surely, to a proposition, applicable as much to the UK as well as to France and the other continental economies. It is the need for more respect for hard-working people in all occupations. It may be that legislation and regulation can make some difference to the quality of the workplace, though note the costs of such regulation in France. But we really need a change of attitude on the part of both employers and consumers. We need to respect the fact that most people do work as hard as they do, not because they are worried the job will go offshore to India but because they would prefer to do a job well than do one badly.