Learning to say ‘you’re fired’ in Europe

European countries have choked their job markets with outdated labour laws and mountains of red tape

Mychele Daniau/AFP/Getty Images

Mychele Daniau/AFP/Getty Images

While in Germany to meet with fellow finance ministers last week, Joe Oliver delivered a gift to his political foes back in Canada. Speaking with a reporter from Reuters, Oliver said that, to encourage growth, countries should loosen their labour laws to make it easier to lay off workers, but added, “That’s what gets people demonstrating in the streets.” Cue the outrage: Here, cried critics, was evidence of the Tories’ secret agenda to destroy Canada’s middle class. Never mind that the Reuters scribe later made it clear Oliver wasn’t talking about Canada, or that the obvious focus of his comments was moribund economies in Europe, such as France, Spain and Greece. The damage was done, and it was up to Oliver’s boss, the Prime Minister, to fend off accusations in question period that his government is out to get Canadians fired. Thanks, Joe. With friends like you . . .

Tone-deaf rhetoric aside, Oliver was hardly going out on a limb when he called on Europe’s economic basket cases to be more competitive. Simply put, many of them have choked their job markets with outdated laws and mountains of red tape. France’s labour code, for one, stretches to nearly 4,000 pages, with 196 pages devoted entirely to a collective-bargaining agreement for hairdressers.

For many outsiders, it’s natural to ask: If unemployment is so high (between 10.6 and 25.7 per cent across France, Italy, Spain and Greece, and as high as 54 per cent for young workers in some countries), why on Earth would you want to make it even easier for employers to ditch workers? Because many of the rules meant to protect existing workers have acted as a disincentive for employers to hire new people.

In France, small companies are effectively punished if they grow to more than 50 employees, because new layers of bureaucratic labour rules kick in above that level. Like many other European nations, France also imposes a lengthy and complex process for laying off workers. The result, during the economic recovery, has been a reluctance on the part of employers to saddle themselves with new permanent workers, opting instead for fixed-term contracts. Protective labour laws have proven to be a boon for those who have permanent jobs, and downright crummy for everyone else—in particular, the young.

Not that things aren’t improving. France, Spain and Italy, to varying degrees, have all enacted reforms in the wake of the financial crisis that aim to make their job markets more dynamic. Greece, Europe’s problem child, is another matter entirely. From the moment the financial crisis exposed its economic growth in the 2000s as a sham, it has been under pressure from creditors to overhaul its antiquated labour laws. For decades, Greece was plagued by a bloated, corrupt and inefficient public service that enjoyed iron-clad job security and crowded out the private sector. When Greece accepted a bailout in 2013, it agreed to slash 25,000 public sector jobs, the first large-scale cut to the government workforce in more than a century. (According to reports, the first two workers to lose their jobs were a cop who’d been nabbed for theft, and an employee who’d been AWOL for 110 days.) Last month, the Greek government reversed course with legislation to hire back 4,000 of those workers.

Now, Greece is once again at the brink. The demand for more reforms—such as a reduction in pensions and labour deregulation—and the strident refusal by the anti-austerity government of Prime Minister Alexis Tsipras to abide by those demands, has set Greece on a collision course with its creditors. It has been an open question in recent weeks whether Greece would default on a $334-million loan payment to the International Monetary Fund this Friday. While it’s expected the two sides will come to a last-minute agreement, as they always have, Greece’s refusal to fully embrace labour reform means this crisis will go on and on.

Here’s the thing. Greece was always going to face this type of crisis, once it adopted the euro in 2001. Five years earlier, Rüdiger Dornbusch, then an economics professor at the Massachusetts Institute of Technology, penned a prescient article for Foreign Affairs that recently resurfaced online. Dornbusch warned that, in adopting the euro, countries that ran into trouble could no longer rely on a weakening currency to boost exports. The only option left: Compete on labour costs. “The European market with the poorest performance is bound to fail,” he wrote. “In backward regions, unemployment will rise, as will social problems and complaints about integration.”

All of that has happened in Greece and, until now, bailouts have kept it afloat. But, unless Greece fixes its labour mess, its days in the eurozone are numbered.

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Learning to say ‘you’re fired’ in Europe

  1. A Europe with millions of unemployed in the streets [no matter how they became unemployed] is not going to improve things.

  2. Golly, all those Central African nations like the Netherlands, Denmark, Germany,Switzerland,
    Austria, Norway, Sweden must be glad they are not in that Europe, eh.

  3. How convenient..They create the crisis through austerity (cutting back), and then now that things are bad, they need to cut back on labor laws too. The same thing is happening here too (we’re going to be directly competing with Vietnam for jobs soon.

    • The crisis was there before austerity was. Most European countries still have government spending at 50% or more of GDP, even after allegedly scaling back spending since 2008. Yet people like you still call it ‘austerity’. Either you’ve got an odd sense of humour or you’re math challenged. Probably both.

      On another note, the most ‘austere’ country in Europe by far is Germany, and they survived the crisis better than anyone. The country that made the biggest reductions in government spending was the UK, which has the second healthiest economy after Germany. So much for your austerity theory.

  4. Ahhh… reality raising it’s ugly head! That’s what happens when you don’t have enough to sell and can’t borrow more money to pay unproductive workers. We are all living in an increasingly global economy.

  5. Pay everybody less! We’ll all be rich ! (Tim Bousquet?)

  6. LOL the left-wing claims it’s because of austerity, and the right-wing claims it’s because of wild spending….and none of you have looked at the actual economy. No wonder it’s a mess.

    • Actually, Emily….both sides of the argument have merit.

      Austerity causes the pain, but Austerity was required because successive Governments are more interested in getting elected, than in producing an economy that works. See our own NDP types in Canada. THEY DON”T WANT PEOPLE TO BE HAPPY AND PRODUCTIVE, as creating such a group of people eliminates the majority of people who woudl support the NDP.

      As for the Right Wing…..they are correct. Why pay 20 workers $65,000 per year, when 8 people could do the same amount of work for the same salary?

      It is not about Government workers….it is about TOO MANY Government workers.

      Greece is a prime example of what happens when Governments interfere in the free market.

      • No they don’t.

        There is no ‘free market’ for one thing.

        You live in a country with a national bank, a national budget twice a year….a budget for each province, territory and city, cartels, subsidies, marketing boards…..

        It’s a very regulated market….same as everywhere else.

        Without regulation there would be millions in the streets….with pitchforks.

        It’s all made worse by the factory floor having moved to China….the Industrial Age is over with…and we haven’t enough educated people to move to the Knowledge Age.

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