The Hindu Business Line : Labour markets astir in France and US

In France, the labour market issues are mixed with job security and in the US with immigration. Quite simply, is there enough room in the labour market to allow free entry?

In a labour market, unlike for goods and services, the products have a voice. And that voice has been quite shrill and loud in the US and France, the two nations grappling with issues affecting those wanting to enter their labour market.

France has been facing at least 10 per cent unemployment among its population, and 23 per cent if you take only the youth. One reason why unemployment is not falling is that it is not easy to layoff an employee. When exit is difficult, people think a hundred times before allowing an entry. French rules, which deal with retrenchment of labour either as a part of or separate from the closure of a unit, and powerful unions have made employers reluctant to hire employees easily.

To partially ease the situation, the Prime Minister came up with a new `First job contract' (known in French by the acronym CPE) which, although approved by the President, Mr Jacques Chirac, last month, was first suspended and then cancelled due to continuing protests in the streets. The new rule allowed an employer to fire workers under the age of 26 without explanation during a two-year period of probation.

HUGE PROTESTS

Initially, the students of Sorbonne, the University in Paris, led the protest against the new law. They were quickly joined by trade unions and students elsewhere. Almost daily protests and strikes disrupted hospitals, schools, rail and air movement, and so on. Estimates of the size of the protests, on different days, place them 1 to 3 million strong. Many of those who joined the protests were looking at larger issues — that the law challenged French notions of job security, and felt that it took France down a path of trying to compete with cheap imports, which they cannot win anyway.

While the French government is trying to improve the labour market for the youth, the socialist minded youth were upset that it was a job contract for just two years. It is not surprising that the unions, which often seek to protect those already in the club of employed rather than make it easy for new people to enter the job market, egged them on.

In making the trade-off between job security and more employment, the Prime Minister, Mr Dominique de Villepin, had put his popularity and his future on the line. Perhaps, he should have called it an internship instead of a job contract. Temporary jobs, even for two years, are a way to learn and impress the employer who may retain you if you are good. If not, you have some job experience that you can leverage as you look at job ads.

IN US, IT IS IMMIGRATION

The problem is slightly different in the US but it has also drawn people to the streets by the thousands. The burning issue is one of immigration and its related effect on the labour market. The unemployment rate in the US has been steady at about 4.8 per cent, in spite of the regular layoffs by restructuring corporations, the outsourcing of manufacturing and service jobs, immigration, and so on.

The US is estimated to have about 12 million `undocumented' (that is, illegal) immigrants. Some who visit the US under various categories overstay their visa and become illegals. But the vast majority are those who have come across the border from the south, mainly Mexico. Economic pressures drive them down a dangerous route of trying to cross the almost-2,000-mile (3,200 km) border that separates the US from Mexico. It is also a crossing of different terrains: At some points you can come over by swimming across the Rio Grande, at others you walk across the desert, in some places you can jump over a fence, and at still others, across a highway.

Most of the immigrants serve to meet the demand for low-skilled, low-wage labour, in sectors such as farming (especially at harvest time), construction, and in the service industries, that employers welcome these people. Though it is illegal to employ an undocumented immigrant, many do. The formal route to enter the country for work, through work permits, is so restricted that business leaders are often appealing to the government to raise the limit.

INFRASTRUCTURE STRAINED

Illegal migration strains many services such as schooling and hospitals, especially along the border states. It is such burning issue that some citizens, unhappy with the level of official enforcement, have formed their own vigilante border patrols and round up those who cross. The new excuse of national security has made many want stricter controls on immigration. But the illegals keep coming because there is a demand for their labour. The legal residents, at the low end of the scale, worry that the continuing immigration depresses wages for entry level, low-skilled jobs and prevents them from having a decent wage progression.

WHAT OF THE `ILLEGALS'?

For several days and in several cities across the country including Boston, Denver, Phoenix, Atlanta, and Los Angeles, thousands of immigrants, both legal and illegal, and their supporters have gone on processions demanding more liberal rules for entry and seeking regularisation of their status.

Apart from revising rules to allow for new migrants, the burning question is: What do you do with those already here? Some argue in favour of regularising them, levying a fine, and providing them a path to become a legal resident. Others vehemently oppose the idea, saying it rewards the illegal, and would encourage more to cross the border. Can you deport 12 million people?

The debates among different shades of political opinion resulted in several Bills but with the lawmakers now in recess, a resolution is pending .

The various proposals include: Making the penalties, now civil, criminal for employers who hire illegals, establishing mandatory sentences for the illegal migrants, and extending the fencing between the US and Mexico that now exists only in some places. Others suggest regularising those already in, and a new `guest worker' programme for fresh entrants.

SECOND-CLASS SYNDROME

In France, the labour market issues are mixed with job security and in the US with immigration. I cannot but reflect how both are similar to what I would call the `second-class-unreserved-compartment syndrome.'

If you have travelled in the second-class unreserved compartment in trains in India, you would have observed this. One carriage in most trains is meant for short-distance and last-minute travellers and reservation is not allowed.

But the demand for seats exceeds supply, at least on the more popular routes, and there is a scramble to get in. If the doors are blocked with people, the windows are fair game to gain entry.

But once a person muscles his way in and occupies a spot (to sit or stand), he joins those already there in trying to prevent new entrants, for after all, there is no room! The unions of France and the residents of the US are faced with this issue: is there enough room in the labour market to allow free entry?

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is cgopinath2000@yahoo.com)

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