Maurice Taylor Jr., the blunt-talking chairman and chief executive officer of U.S. tiremaker Titan International (TWI), has outraged France by claiming that the country’s “so-called workers” fritter away their working days with breaks and chitchat.
In a letter to French Industry Minister Arnaud Montebourg, Taylor said Titan had no interest in taking over a factory in the city of Amiens that Goodyear Tire & Rubber (GT) plans to close. “I have visited the factory a couple of times,” he wrote. “The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three and work for three. I told the French union workers this to their faces. They told me that’s the French way!”
Montebourg on Feb. 20 fired back with a letter blasting Taylor for his “perfect ignorance of our country” and extolling what he described as France’s “globally recognized attractiveness” for business investment.
Taylor and Montebourg are both dead wrong.
Even allowing some room for exaggeration—would Goodyear really pay employees for a full day when they worked only three hours?—Taylor is mistaken that French workers are lazy and overpaid.
France’s productivity—total economic output divided by the number of hours worked—is among the highest in the developed world, higher even than Germany’s. Nor are French paychecks lavish. Average after-tax incomes in France are about one-third lower than in the U.S., and trail those in many Western European nations as well. You can’t really blame French unions, either. Union membership in France is much lower than in Germany.
Why, then, are French labor costs so high? On average it costs a French employer €34 ($44.89) an hour to keep a worker on the payroll, more than in any euro-zone country except Belgium.
The answer—and this is where Monsieur Montebourg gets it wrong—is that the government burdens employers with payroll taxes and regulations that drive costs through the roof. That explains why France has lost more industrial jobs than any European country during the past decade. Tens of thousands more, including some 1,173 positions at Goodyear’s Amiens plant, are at risk.
Recent government initiatives, including temporary credits to offset payroll taxes, don’t appear to be helping much, as unemployment claims are at a 15-year high. And the government hasn’t had much success in finding buyers for ailing factories. Titan, based in Quincy, Ill., is one of several that have walked away from such deals in recent months.
Even some unions now agree that France needs to overhaul its stifling 3,200-page labor code that imposes costly job protections and benefits, which cause employers to avoid hiring workers on permanent contracts. Then there’s the maximum 35-hour workweek, imposed by a previous Socialist government in 2000. It’s been watered down since then but still adds significantly to business costs.
Still another factor are the charges piled on employers to support French government spending, which accounts for a staggering 56 percent of the economy. Mandatory employer contributions toward pensions, unemployment insurance, health care, and other benefits can add 50 percent to an employee’s base salary.
True, French workers benefit from those programs, which help offset their relatively modest wages. It’s a safe bet, though, that most of the country’s 3 million unemployed would rather be working than on the dole. Otherwise, why would employees be fighting so hard to save their jobs at Goodyear, Peugeot (UG:FP), ArcelorMittal (MT), and other companies that are downsizing their French operations?
Yet despite all these problems, French labor is among the most productive in the world. How can that be? Weird as it may seem, the 35-hour work week and chronically high unemployment have actually helped improve productivity, says Renaud Bourlès, an economist who has studied the phenomenon. “When you have a longer working day, at some point because you’re becoming tired, it decreases your productivity,” says Bourlès, who works at the Aix-Marseille School of Economics and the École Centrale Marseille. And when unemployment is high, companies tend to hire and retain the best-qualified and most-productive workers, he says.
Whether they’re productive or not, Taylor has made it clear he has no interest in French workers. The combative 68-year-old CEO—whose nickname is “The Grizz,” and who sought the Republican presidential nomination on a platform that included eliminating sick pay for government workers—told Montebourg he’ll invest elsewhere.
“Titan is going to buy a Chinese tire company or an Indian one, pay less than one euro per hour wage, and ship all the tires France needs,” he wrote. “You can keep the so-called workers.”