Pity The Poor Fools – Why Does France Subsidise A High Minimum Wage?


It would probably help matters of the folks over at Quartz understood the relationship between the two things they mention about France. Their piece is concerning the current riots – just another outbreak of the peeps not liking the rulers there – and they manage to mention two separate things. Without realising how intimately they are linked:

Increase the minimum wage
France’s pre-tax minimum wage (link in French) is €1,498.47 ($1,701.80) a month, for a work week of 35 hours, or roughly $11.22 an hour. In the US, the federal minimum wage is $7.25 per hour and has not budged since 2009. A US employee working the same number of hours as a French worker (35 hours per week) would make $1,100 per month. (Minimum wage laws vary across US states, with some cities like Seattle offering $15 an hour.)

Yes, OK, high minimum wage. This aiding in explaining France’s high unemployment rate. Further, given that a minimum wage always binds more onto the employment prospects of the young, this aids in explaining the much higher such rate among the young in that country.

OK, sure, some try to argue against these basics but that’s not quite what interests here. Instead, we’re also told this:

Increase public subsidies for hiring young employees
French employers who hire workers between 16 and 25 years old on a short-term, full-time, or apprenticeship contract, receive a government subsidy to help offset the costs of healthcare, pensions, and other social welfare contributions, which are unusually large (paywall) in France. The government is willing to give subsidies, tax credits, and tax exemptions worth as much as €7,000 to incentivize companies to hire young people. Previous French governments have offered to pay up to 75% of young workers’ salaries for up to three years (paywall).

So, companies won’t hire young people because the costs of doing so are prohibitive. At which point the government offers subsidies to employ young people.

Wouldn’t it be easier to just not have the high minimum wage so that companies would hire young people?

And wouldn’t it be useful if Quartz could note the connection between the two points?

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Nick Burton
Nick Burton

Alternatively, don’t expect the young to contribute as much to health and pensions…