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France may cut red tape in jobs boost
TWO independent economists are calling on the French government to do the unthinkable: remove the mountain of petty restrictions that limit entry to trades and professional services, from hairdressing to accountancy.
In a report commissioned by finance minister Nicolas Sarkozy and employment minister Jean-Louis Borloo, they estimate that removing barriers to entry could create a million jobs and trigger improved services to the country’s 60 million people.
The report is political dynamite in a country famous for kow-towing to lobby groups but offers a glimmer of hope that France will begin to tackle the needs of its 2.45 million jobless and roll back an unemployment rate that has stagnated at 10% for two decades.
The study was compiled by Pierre Cahuc, economics professor at the Sorbonne university in Paris and Francis Kamarz, head of research at the French national statistics institute, INSEE, and a research fellow at London’s Centre For Economic Policy Studies. Both are specialists in labour economics.
The report blames bureaucratic restrictions and entry barriers for France’s stunted services sector. In particular, it proposes repealing legislation designed to limit the growth of out-of-town superstores and preserve small shopkeepers in city centres.
Two particular laws are highlighted: the 1973 Loi Royer, which subjects applications to open out-of-town stores to a consent process that can drag on a decade, and the Loi Raffarin - passed in 1976 at the behest of Jean-Pierre Raffarin, now France’s prime minister, which reinforced the strictures.
Although the rules have preserved small stores, it says, the pace of retail job growth, which averaged 0.6% a year before the laws were passed, has since slowed to 0.1%. Both laws were backed by President Chirac, which makes speedy removal especially unlikely.
But the report also highlights a spread of other blocks on job growth. It points out that Paris has only 10,000 licensed taxis - fewer than 80 years ago, and a fraction of the number of black cabs and mini-cabs in London. Such is the demand for cabs that licences are traded for more than 100,000 ($131,000, £70,000).
It also highlights the 1946 law that requires the manager of every hairdressing salon to possess a particular professional qualification.
It singles out several protected professions for criticism. France has a deficit of veterinary surgeons, despite the French passion for poodles and other lap-dogs, because entry requirements to the profession are set too high, it says. It also points out that veterinary nurses are barred by law from giving animals injections, even though nurses practise competently on humans.
Onerous qualification requirements can have far reaching consequences for the economy, it says. French accountants must complete seven years’ training, compared with three years in the UK.
One consequence is that France has around 40,000 accountants, compared with more than 280,000 in the UK. This, the authors say, helps explain why French accountancy firms are relatively small - they can’t get the staff to grow. It might also contribute to France’s high rate of company failure, though that is not an issue the authors address.
An obsession with qualifications and training for jobs that may sometimes require little more than common sense restrains recruitment, they say. French waiters are highly trained in the art of serving at table, but sometimes customers would happily settle for less expertise - if only there were more of them so that they didn’t have to wait so long to be served.
Time Warner
ONCE reports were published last week that Time Warner, the world’s biggest media combine, was about to settle with the government over alleged accounting irregularities, the firm’s shares began to soar.
The Securities And Exchange Commission (SEC) alleges that Time Warner inflated its earnings before and just after the 2001 merger with AOL. The charges have been hanging over Time Warner for more than two years, maintaining a drag on its share price.
Last week the Washington Post reported that the SEC and Time Warner had agreed on a $750m settlement in which the company would not have to admit wrongdoing. This is significant because it could block a slew of more damaging shareholder class-action suits.
Time Warner had said it was setting aside only $500m to settle the charges, substantially less than the figure cited, which would match the largest penalty ever paid (WorldCom’s $750m fine last year).
Though company spokesmen deny the newspaper story and SEC officials refused to comment, the report lit a spark under Time Warner’s shares. They soared from $17.30 on Monday to an $18.03 opening on Friday in New York. In a holiday-shortened session Friday, Time Warner lost 11 cents to close at $17.98.
Analysts have set a range of $20 to $25 a share once the SEC headache is over. In a survey of 28 analysts, nine have labelled Time Warner a "strong buy", nine a "moderate buy", and 10 recommend holding the stock. None suggest selling.
As soon as the matter is settled, expect boss Dick Parsons to quickly begin bidding for new acquisitions, especially for the cable system of bankrupt and disgraced Adelphia Communications. The SEC won’t permit Time Warner to issue new shares in the company or any of its divisions until a settlement.
The direction the shares take after a settlement is officially announced and after Time Warner again goes on the hunt for acquisitions will reveal whether it was only the SEC that was holding the price down or whether there are more fundamental issues at play, such as the exodus of AOL subscribers to faster and cheaper internet access.
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Captain Cab
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