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December 15th, 2017

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France's Other Problem --- Job-Killing Economics

Larry Elder

By Larry Elder

Published Jan. 15, 2015

 France's Other Problem --- Job-Killing Economics
François Hollande and Napoleon by Riber Hansson, Sydsvenskan
Islamic terrorists slaughtered 17 innocents in Paris in an attack described as "France's 9/11."

The two terrorist suspects at the satirical newspaper massacre are brothers, born and raised in France, children of parents who emigrated from Algeria. Some blame France's failure to "assimilate" Muslim youth on their attraction to violent jihad. While almost 25 percent of French youth is out of work, the number of young French Muslim people without jobs is over 40 percent. Muslims account for 10 percent of the French population but occupy 60 percent of its jails.

Never mind that Osama bin Laden was wealthy. Ayman al-Zawahiri, the current head of al-Qaida, is a doctor. Several of the terrorists who crashed planes into buildings and into Pennsylvania on 911 were middle-class or better, and several were college grads.

But assuming "lack of opportunity" is a cause for the attraction to violent jihad, why does the French economy offer so few options? The answer is simple: job-killing economics.

At all levels of government, France takes over 44 percent of the earnings of its citizens. And this is before one assigns a cost to the numerous regulations placed on the shoulders of French entrepreneurs. In America, at all three levels -- federal, state and local -- government takes 33 percent of GDP, including mandates like Social Security. Add a cost to regulations mandated by state and local government, and UCLA economist Lee Ohanian says that government takes over 50 percent. Assume the same "cost percentage" that Americans pay for regulations to the French and you have a French economy where government takes about 65 percent of the earnings its people.

So what does France do? They elect a president, Francois Hollande, who literally said he "hates the rich." To demonstrate the hatred, the new president imposed a top marginal tax rate of 75 percent on incomes over 1 million euros. Rich people don't become rich for being stupid, so some did the commonsensical thing. Rich people left.

How idiotic are the economics in France? Get this. An employer, even one running a nonprofit, can hire a young worker and have the government pay up to 75 percent of his or her wages. Supposedly, this induces employers to hire young people. But from where does the money come? And how was it productive for government to subsidize salaries, let alone up to 75 percent!

About this scheme, the Wall Street Journal wrote: "By opening its wallet, the government is relying on the playbook of previous French presidents who financed jobs on a massive scale in an attempt to bend the unemployment curve. Those past measures, however, failed to change the overall trajectory of French unemployment and have left the country's job market larded with government-sponsored contracts. Companies took advantage of the incentives to snap up skilled workers, many of whom would probably have landed jobs without government subsidies. Employers also became accustomed to hiring young people at a discount."

In the Heritage Foundation's "2014 List of Economic Freedom," France continues its dismal performance: "France's economic freedom score is 63.5, making its economy the 70th freest in the 2014 Index. Its overall score has decreased by 0.7 point due to declines in monetary freedom, fiscal freedom, and business freedom. France is ranked 33rd out of 43 countries in the Europe region, and its overall score is slightly higher than the world average but below the regional average. Over the 20-year history of the Index, France's economic freedom has been stagnant, recording the fifth worst performance among advanced economies."

Urban pockets known as "les banlieues" surround many French cities. Some of these high-unemployment, high-crime ghettos have become literally off-limits for non-Muslims. Even police officers fear these areas where car-torching fires average 100 per night, according to an estimate by France's interior minister in 2013. Authorities estimate that 80 percent of France's car blazes are set out of anger and disaffection, while 20 percent are tied to insurance fraud.

The French population is aging. But its welfare state requires a constant infusion of younger workers to prop up the older retired ones. Trouble is many of the Muslim youth are, to say the least, disillusioned with France. According to a Pew Research poll conducted in 2006, 42 percent of young French Muslims believe suicide bombings are "often," "sometimes" or "rarely" "justified," with 35 percent of all French Muslims holding that view. Newsweek reported last year that a poll carried out by ICM for Russian news agency Rossiya Segodnya found 16 percent of all French citizens had a positive opinion of ISIS.

President Hollande's popularity has cratered along with the French economy. His poll numbers are now about 15 percent, and the idiotic 75 percent tax quietly expires at the end of this month. The bad news is that he has two years left on his term.

Assuming, for the sake of argument, that the anger of French Muslim youth is tied to the dismal French economy, have you any fresh ideas, Mr. Hollande?

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Larry Elder is a best-selling author and radio talk-show host.

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