With this in mind will be using multiple sources to discuss and ampere the two countries’ economic conditions and unemployment rates. I will then use this information to analyses why one country (Germany) can experience a lower unemployment rate than the other (France) and find the hidden answer to this issue. Starting with France, according to the trading economics website, it has a high jobless rate of 10. 4% (2). Because of this it is now at its “highest since 1 997″ (3) and kept on rising meaning that as of February 2014, the unemployed population (currently at 3. Million) will continue to rise. Despite these alarming figures, France currently has the 5th arrest GAP in the world and is ‘the second-biggest economic engine in the Euro zone’ (4) behind Germany. These are confusing and also impressive stats considering its depressing unemployment rates. On the other end of the spectrum however, Germany has witnessed the opposite, ‘With unemployment figures at record lows since the ass’s” (5). Latest figures show that Germany has a jobless rate of 5. 1 Oh, giving it the 4th smallest unemployment rate in Europe behind its Scandinavian associates.
Even with unemployment rates of less than half that of Frances; still it only sits one above them on the table in terms of GAP on a global scale at 4th. Nonetheless, what is strange is Germany is not the only country who is experiencing low unemployment rates at the top of the global GAP table, unsurprisingly. With the likes of similar performing economies all in the top 10 (such as the KICK, Russia and Japan) all having unemployment levels averaging the 5% mark, it becomes suspect that France is the anomaly.
But why is France, a strong economic power, experiencing high and rising unemployment levels compared to similar operating economies like Germany who are experiencing increasingly lower unemployment rates? There are many hidden reasons which have caused this issue to arise due to effect of both parties. With regards to France, the core reason why it has been experiencing high unemployment stems from the states involvement in the economy, proving to be one of its main weaknesses. For example, in recent years the development of state favors and major infrastructure programs have led to huge increases in the government’s budget.
For example, “through research and projects, Rseas Fear De France is committed to make all networks as efficient and available as possible” (6). At this point these economic aids may seem as strength for French industries and businesses, due to bringing cities closer by slashing train journeys and thus connecting businesses together. But instead these projects have turned on their head. With these programs finance has been required to fund them and like any government, the French government has resorted to increased taxation.
In France however, a large proportion of this increased tax has fallen on French businesses rather than on its individuals. This method caused Frances largest businesses such as Renault and Air France to “be burdened with the largest royally tax the world has seen at an enormous 43%” (7). To emphasize the enormity of this percentage, the UK pays a payroll tax (National insurance) of only 1 1%. The high level of corporation tax in France is the prime reason why French industries have lacked competition on the global market.
With this, brings a growing trade deficit, which drags economic growth. To summarize, the French government’s contribution to public spending has brought about a high corporation tax burden, which has been felt by French businesses; particularly small businesses. The lack of competition has caused a decline in industries, slowing of economic growth and an increase in cyclical unemployment. This idea can be backed up with evidence of “Peugeot Citroen announcing a ?1 billion savings program” (8), which will see over 8,000 jobs being cut and multiple factories closing down.
They announced this program because Peugeot Citroen “had been faced with a first time loss of ?million in 2012” (9). But why did Peugeot face such a large loss? Some of this can be blamed on a slump in sales in the recession-hit south of Europe. However, the core reason is because Frances manufacturing industries are declining in competitiveness. John Madeline, business reporter describes how “traditional carmakers such as Peugeot are stuck with traditional factories and well-paid workers”. He also stated “companies that make high-profit margins are those who sell luxury cars, such as Mercedes (in Germany)” (10).
This creates France to be unable to compete on price, due to higher labor costs and unable to attract profitable luxury buyers. On top of that, with the Socialist government imposing higher payroll taxes than anywhere else in Europe, it’s no surprise to see why Peugeot Citroen and even Renault are seeing losses in their income statements. Furthermore, Nicolas Bouzouki, founder and director of economic analysis company Asters says “such a problem (declining competitiveness) won’t be fixed unless the government takes an entirely new approach to help businesses strive by cutting public spending and labor costs” (1 1).
Having exposed the hidden reasons explaining why France have high unemployment levels, it’s also important to see how other countries, such as Germany for example, have managed to sustain low unemployment despite its similar GAP levels with France. Germany, “Rupee’s industrial powerhouse and the world’s second largest exporter’ (1 2), has core reasons why it has one of the lowest jobless rates in Europe and has “Rupee’s highest youth employment rate” (13). Europe faces a crisis of escalating youth unemployment, despite the world financial system stabilizing.
With over 10 EX. countries (including France, Belgium, Spain, UK etc) having “youth unemployment rates soaring above 20%” (1 4), it is no surprise to witness “5. 6 million under ass out of work’ (September 201 3) (15). However, In the midst of all the doom and gloom within Europe lies a striking exception. That omission from the norm is Germany with a youth employment rate of only 7. 5%! (16). But how have they managed to achieve a below average youth unemployment rate despite all other members creating the opposite?
This boils down to Germany’s success with its apprenticeship system. Professor Hagen Kramer, economics professor states that “the German economy is quite export-orientated and its strengths are high-quality/tech products” (like Mercedes Benz) (17). Therefore, what he is suggesting is that with this comes a need for a plentiful supply of qualified labor to produce these goods. Due to this demand, over two thirds of young Germans are seeking apprenticeships after leaving education. In comparison to that, only one in ten take up apprenticeships in Britain.
Germany’s apprenticeship System has emphasized the importance of plugging young workers right into the labor system and having them train and assess the ability of an Spellbinder, meaning trainee, rather than leaving them to flounder jobless. Neil Cranberry, head of employment policy for the confederation of British Industry, backs up the effectiveness and importance of having an apprenticeship plan for young workers by suggesting “The longer hey are out of work, the harder it becomes (to get work)” (18).
To summarize how Germany have tackled low unemployment rates, it is purely because of how efficiently they have targeted young workers, by creating a unique market for their labor and giving them a wide choice (over 350 different kinds of apprenticeships) in what path they want to take. The successfulness of this apprenticeship system has its roots from the strength of their exports, which account for “?1 ,Bonn Euros in exports” (19). “Strong exports of luxury German cars are helping drive employment figures” (20).