Dear all,
The crisis triggered by France’s ‘Yellow Vests’ movement has been going on for three weeks now. On Monday, Emmanuel Macron tried to calm things down by speaking on television in prime time, offering concessions and laying out a path to try and move forward. But to make it short, I think it is just a rolling catastrophe, as I’ll try to explain below.
France: The beginning of the end
First, at the heart of Macron’s new approach is the lowering of the French payroll tax for those earning the minimum wage. There’s nothing new here: French governments have been doing the same thing since 1992, thinking that subsidizing low-skilled jobs in legacy industries is the only way to fight unemployment without hurting purchasing power. But there are two problems with that. First, it doesn’t work: it’s not as if unemployment has been going down in France since 1992! Second, it’s a disaster in terms of economic development. It makes high-skilled jobs extremely expensive in relative terms, and …