France Economics Research Guide

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- Labour Market Analysis

- Unemployment Rate in France

Unemployment rate is a percentage of labor force that currently does not have a job in a country. Unemployment can be classified to 3 categories: Frictional unemployment, Structural unemployment, and Cyclical unemployment. Frictional Unemployment is unemployment caused by people in the process of changing jobs to find a better job. Structural unemployment is unemployment caused by a worker lack of skill to do the jobs due to technological change. Cyclical unemployment is unemployment due to a bad economy, which resulted in workers losing their jobs.

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After the crisis in 2008, France unemployment is rather high. It fluctuated at 9.5% to 10.5% from the year 2013-2016. Based on IMF report, In France most unemployment is the structural unemployment. France companies have lessen their demand for labor supply due to high economic uncertainty after the crisis. There is also skill mismatch issue that the young labor in France are facing. Most of the young labor in France did not finish their upper secondary studies because of the 2008 crisis. Around 24.5% of the youth labor force are unemployed in France. Based on an analysis by Walker, France have a dual labor market system, which makes their citizens have higher pay, and more often promotion than foreigners. The system is quite unfair that it does not attract foreign labours to work in France. In addition to the system, foreign workers and young labours only get a short-term work or be unemployed. According to BBC, France is a country with strict legislation of dismissal for employee contracts. This causes companies a hard time in dismissing employee and could employ more workers. The labor cost in France are also high that resulted in the labor market not taking a low paid works.

These problems and system that France uses has resulted in the increase of unemployment rate across the country. Thus, the government has attempted to reform the system in 2014. The reforms will counteract against the problem of unemployment. Based on They plan to lower the existing barriers in dismissal of workers, Allowing some employees to work more hours than the normal work hours, which is capped at 35 hours per week, and Gives powers to firm in cutting working hours and reduce pay.

These reforms will give a flexibility in the labor market, encourage entrepreneurship, and create more available job in the country.

France governments have also created a policy to relieve the skill mismatch issue. According to Thelocal (France local news), Governments have started training scheme for 5oo thousand unemployed person with a budget of €80 million.

- Price Level Analysis

- Inflation Rate in France

Inflation rate is a percentage rate of change in price index measured over a period of time.[pic 5]

After the global financial crisis in 2008, France recovered and the inflation rate of the country became unstable. In the year 2015, the inflation rate fall down below 0%. This was because of the drop in global oil price and a drop in energy price by around 7.1%. As reported by BBC News, these conditions has led to a drop in the price level by 0.4%. Moreover, while the falling price of energy there is also a winter sale. Falling of price could be harmful for an economy if consumers and companies did not delays their spending. The winter sales in France causes price level to go down to 1.1% Low inflation rate could create difficulties such as, debtors are penalized, and economic growth slows down. It could resulted in increase of wages and salaries that counters the government policies on decreasing unemployment rate.

In order to prevent deflation, The European Central Bank, which administer the monetary policy around the Eurozone and their objectives of maintaining price stability. According to European Central Bank, They implemented monetary policy by reducing interest rates to below 1%. Monetary policy is used to search for a neutral rate that can stabilize the inflation rate. If the interest rate is not reduced, it could resulted in real income and inflation rate in the country to lower. Furthermore, The European Central Bank also implemented some of non-standard monetary policy. Such as, large-scale asset purchase program. These monetary policy has help stabilizing inflation rate and creates a better financing for the household and firms.

- Conclusion

In conclusion, I think that France economy is not strong. They are still starting to recover and have yet accomplish any big things to push the economy to be stronger. They certainly have recovered from the crisis. However, the economic progression is much slower than neighbouring countries.

France suffered a massive economic problem when the Global Financial Crisis in 2008 affected the country. The country started to exit from the crisis in 2009. After the crisis, France’s unemployment rate is very high and they have only started to reform recently. Unemployment rate in the country rose up due to the 2008 crisis and the government has never been able to bring down the unemployment rate. The effect of the system reformation can only be assess in the future. Furthermore, the high unemployment rate in the country have affected the speed of economic growth. France real GDP growth rate per year have only increased by 1%, which is small compared to Germany and UK. The inflation rate in France is also unstable. Sometimes the inflation rate in France could go below 0%. When inflation rate goes down, price level in the country also went down. A further decrease in the inflation rate could cause a deflation in the country. However, a monetary policy has been implemented to help stabilize the inflation rate. High unemployment rate have also affected the GDP per capita graph. As population increase, unemployment rate need to go down in order to achieve good potential GDP. Thus, all five graph that are analysed on France are affected by the global financial crisis in 2008.

Word Count : 2094

Reference List

Business. (2015). France Inflation Turns Negative. News. France: BBC News. Retrieved from http://www.bbc.com/news/business-31532269

Central Intelligence Agency. (n.d). The World Fact-book of France. Publication. United States: Central Intelligence Agency.

European Central Bank. (2015).