French Businesses Grapple with Social Restraints

Many economists believe an inability to create flexibility in a rigid labor market contributes to France's high jobless rate. Yet many French companies are world leaders and France has the world's fifth-largest economy.

SCOTT SIMON, host:

This WEEKEND EDITION from NPR News. I'm Scott Simon. Coming up, reinventing religion. But first, this week the French government gave into months of street protests and withdrew its controversial youth employment law. Many economists believe France has once again failed to bring more flexibility to its rigid labor market, which they see as the primary cause of the country's chronically high ten percent unemployment rate. But there's another side to the French workforce and all those government regulations. Many French companies are world leaders in their fields and France has the world's fifth largest economy. From Paris, Eleanor Beardsley sorts it all out.

ELEANOR BEARDSLEY reporting:

The headquarters of French multi-national company Publicis are located in the heart of Paris on the Boulevard Champs d'Elysées. Publicis, the world's fourth largest advertising agency, is one of hundreds of French companies in sectors from cosmetics to telecommunications operating successfully in the global market. In 2005, French multinationals posted record profits and were third in international takeovers. In his office, overlooking the Arc de Triumph, Publicis president and CEO Christophe Lambert says French companies have been successful in adapting to the globalized economy.

Mr. CHRISTOPHE LAMBERT (President and CEO, Publicis Group): We are very strong in innovation. We have very well trained and well educated youth, and a lot of brains, French brains are chased by a lot of countries.

BEARDSLEY: But Lambert says government regulations within France mean the most successful companies often do the bulk of their business outside the country.

Mr. LAMBERT: We have been very successful and very aggressive outside France. The proportion of the business which is currently done in France in the domestic market is very low.

(Soundbite of French protestors)

BEARDSLEY: The latest attempts to pass a rather small measure aimed at creating jobs flexibility in youth employment ended in failure after two months of mass protests by a population scared of losing its cherished job security. But analysts say something positive has come out of the crisis. They say more French people now see the link between rigid labor laws and chronic unemployment, something that could make reforms easier in the future. Many of the people trying to change the system in France think that the public's misconception about the global economy is one of the biggest impediments to change. Jean-Pierre Boisivon of the French Enterprise Institute says French leaders seem unable to sell economic reforms to the public and he blames their education.

Mr. JEAN-PIERRE BOISIVON (French Enterprise Institute): Most of the French elite, the teachers, but also the high civil servants, they learn an economy very different what the economy is today, an economy where the state is still playing a major role, not the role of regulation, but as a direct actor of the economy life. It's economies of the '70s and not today's free market economy.

BEARDSLEY: But not everyone is stuck in the past; 33-year-old entrepreneur Esolis Kauft(ph) founded her interactive marketing company, Mille Merci(ph), six years ago. Unlike Publicis, Mille Merci does nearly all of its business in France and it's been very successful. Kauft has just opened a subsidiary in Spain and is now listed on the Paris Stock Exchange. She offers her 40 employees the kind of long-term contracts with full benefits that the protesting students were demanding. Kauft says that encourages employees to have a long-term commitment to her company. But she says you have to be careful about who you hire. She thinks she's been lucky so far.

Ms. ESOLIS KAUFT (Owner, Mille Merci Company): I think the company attracts people who want or like a little bit of risk. We don't really see people who want stability for all their life and so on. People here want a dynamic company who's growing very fast.

BEARDSLEY: Kauft dismisses the recent street demonstrations as part of the country's history and folklore, but she says the French will have to accept some changes and the ones she'd most like to see is an end to the 35-hour workweek.

Ms. KAUFT: I would like to change deeply the culture to start to focus on the number of hours of work, which is I think a big problem for small companies. It's a social pressure and I think it's not good for young people.

BEARDSLEY: Medium and small businesses like Kauft's create most of the new jobs in France and the government is anxious to help them. But after its recent disastrous attempts at change, analysts say all further efforts are currently on ice, at least until after next year's presidential election. For NPR News, I'm Eleanor Beardsley in Paris.

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