The macroeconomics of the French labour market

The French labour market is divided into two very different parts: The skilled labour market, where there is a shortfall in supply and a scarcity of skilled employees; The labour market for the low-skilled and unskilled, where there is excess supply and high structural unemployment. This breakdown leads to some fairly clear economic policy recommendations: Lowering companies’ social contributions on skilled wages is ineffective, since at equilibrium, due to the shortfall in the supply of skilled workers, wages will rise by the amount of the reduction in social contributions. The only argument would be incentive -linked : encouraging employees to become qualified through higher wages; but the most important would be to increase the level of labour force skills by reforming the education and training system s ; It is therefore necessary to lower the structural unemployment rate of the low-skilled; it is difficult to lower labour costs: wages cannot be reduced, even by replacing them with public transfer payments, and there are no longer any social contributions at the level of the minimum wage. We can also think of improving skills, or of a coordinated increase in sales prices in sectors that employ unskilled workers: agriculture, retail, hotels and restaurants, personal services, unsophisticated services to companies. This would be tantamount to subsidising low-skilled employment with a tax on buyers of goods and services whose production primarily uses low-skilled labour.