Trying to be Cheap While Having the Most Expensive Welfare State: The French National Growth Strategy

Since the beginning of the 1990s, France growth and job creation strategy is based on a general policy aimed at decreasing the cost of low wage jobs, through expensive and expansive programmes of social contribution exemption on low wage workers and fiscal expenditure. The aim is to relieve French firms from a heavy cost of labour while maintaining the existence of an expensive welfare system and a relatively high minimum wage. This strategy progressively replaced any other industrial policy in France. This policy mix can be understood by the political compromises governments had to establish between employers pressing for low wage cost and the high political legitimacy of the French social model. This paradoxical policy mix has lead to an hyper-productivity scenario, a race to the bottom of French industries which have ceased hiring and investing in innovation, R&D, high level of unemployment amongst the unskilled, the youth and the old workers, and dualisation of the labour market and of the welfare system.