If the French are serious about reducing unemployment, I have a policy for them that will cut it at a stroke, with many fewer unpleasant social consequences.

Simply reduce the student grant, but make students eligible for unemployment benefit. On top of this, make all other state benefits for 20-24 year olds conditional on actively looking for work, in some half-defined fashion. This will immediately increase the measured labour force participation rate of French 20-24 year olds. Since the unemployment rate is defined as the unemployed population relative to the labour force, the increase in the denominator will bring the unemployment rate down at a stroke.

This is a joke, but it's a joke with a serious message. The figure of 23% youth unemployment is more or less meaningless, because the labour market participation rate of French 20-24 year olds is very low. This is partly because more of them are in higher education, partly because the French benefits system is very generous by European standards and only to a very small degree due to the kind of issues that the CPE was meant to address. Statisticians have been bemoaning the tendency of the French political class to misinterpret the high youth unemployment rate in France for years, but to seemingly no avail.

At the end of the day, France has a labour market participation rate way below that of the UK, but a GDP per capita almost exactly the same. If you were a recently-arrived Martian and saw two economies with roughly the same population and roughly the same output, but one of them had much more of the population working in order to achieve it, would you definitely say the one achieving the same results with less labour was the one that had the problem?

For extra credit, if New Labour meets its target of encouraging more of our young adults to stay in full-time education, what will happen to the youth unemployment rate?



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