2023-05-26 11:31:44
Will we ever reach the Holy Grail of full employment? At least that’s what Emmanuel Macron’s entourage hopes, as the unemployment rate continues to fall in France. It stood at 7.1% in the first quarter of 2023, the lowest in forty years.
“For six years, we have had a goal which is full employment and this goal today is achievable, it is even closer than ever,” said Labor Minister Olivier Dussopt on Tuesday during a press conference.
The expression “full employment” is regularly used by political figures but also in economics, of which it is one of the important theoretical notions. Because it is indeed a theory towards which economies are tending, but whose reality is quite different. So what does this notion really imply for France?
1. What is full employment?
The concept of full employment is not new. It was the economist John Maynard Keynes (1883-1946), the father of macroeconomics and recovery policies, who developed this theory in 1936. For him, full employment is equivalent to the absence of involuntary unemployment. Clearly, anyone who wants to work can do so without obstacles in the market.
Since then, this notion has been adapted to our modern economies, and the International Labor Office (ILO) has established thresholds to define full employment. According to the institution, it is equivalent to an unemployment rate of less than or equal to 5%.
This 5% of the working population who is unemployed corresponds to “frictional unemployment”, which cannot really be fought against. These are people who are changing jobs, who have to move between two jobs, who are looking for information about a future employer or who are waiting for their contract to start. It is difficult to go below this 5% mark since there will always be some of this “friction” in the job market.
2. What is the limit of this notion?
The unemployment rate is calculated in the same way in all the countries of the European Union: it is the ratio between the number of unemployed and the active population. But this measure has limits: it is enough to have worked one hour a week to leave the category “unemployed”, and you must also be actively looking for a job to enter it.
In addition, this category does not include people discouraged by job search, who would have given up. Nor an unemployed person who would have done only two hours of work in a week. The notion of “unemployment” is therefore relatively restrictive.
“We must not forget to consider what is called the unemployment halo, made up of people who are not counted as unemployed but who are not working and wish to work. We are talking here about 1.9 million people according to Insee, ”explains Géraldine Rieucau, professor of economics at the Picardie Jules Verne University and associate researcher at the Center for the Study of Employment and Work.
3. Are we talking about the same “full employment” everywhere?
The use of the expression “full employment” is recurrent in French politics, evoking both an ambitious objective and a reminder of the prosperous years of the Trente Glorieuses. For Emmanuel Macron, who has made it an avowed objective, reaching a rate of 5% would be an undeniable political success.
However, if this 5% limit corresponds to that of the ILO, it is in reality theoretical and does not apply in the same way to all States. Rather, it represents an order of idea toward which economies should tend. In addition, in some countries, the proportion of unemployed considered to correspond to full employment is lower: often between 3 and 4%.
This is for example the case in the Netherlands, but also the United States: the first world power usually estimates (except in the midst of a health crisis) between 3 and 4% the level of unemployment corresponding to full employment among Americans. .
Why is it different in France? A rate of 3% seems almost utopian in France, because the frictions of the labor market are greater. “Frictional unemployment” is particularly difficult to reduce for structural reasons, in particular due to a lack of flexibility.
4. What would be the advantages of such a situation?
“For a State, the advantages of full employment are quite obvious. It’s a virtuous circle: it means that almost all working people receive a salary. This supports consumption, therefore a potential increase in the activity of companies which then need to hire”, summarizes Géraldine Rieucau.
Full employment is therefore supposed to create wealth for the country, but also greater competitiveness in relation to its competitors. The case of the United States is often cited, where the unemployment rate generally fluctuates between 3 and 4%, depending on the month.
5. How many more jobs to get there in France?
For France, the unemployment rate would then have to reach 5%, a drop of more than two points. In number of workers, this would be equivalent to approximately 800,000 additional jobs.
We have to go up to “1.3 million if we want reaching 5% unemployment to be accompanied by a reduction in what is sometimes called the unemployment halo and thus go even further in terms of the reality of full employment,” Labor Minister Olivier Dussopt acknowledged this week.
6. What are the main obstacles to full employment?
If unemployment has been falling almost continuously in France since the end of 2020, the fight is not necessarily won. “We can clearly see that there are still obstacles,” underlines Géraldine Rieucau. First of all, in certain sectors such as the restaurant industry, there is a shortage of labor due to difficult working hours and working conditions. Then comes the question of remuneration, sometimes too low as in the public service, which means that certain offers do not find takers. Finally, it is not always easy for workers to be geographically mobile to find or change jobs. »
Added to this is the issue of worker training, if they want to change jobs for example, or even the problem of age. In addition, it is difficult for seniors to find a job once they have passed a certain age, even if they want to: French companies are particularly reluctant to recruit older workers.
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