Can he bring them home?

Photographer: Justin Tallis/AFP/Getty Images

Churchill Tutors France's Economic Migrants

Therese Raphael writes editorials on European politics and economics for Bloomberg View. She was editorial page editor of the Wall Street Journal Europe.
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Before heading off for a tete-a-tete with the British prime minister Monday, French President Francois Hollande made a stop in the north London suburb of Wembley. On a sprawling five-acre site acquired in 2012, the president inaugurated a French lycée named, unusually for a French school, after a British leader -- Winston Churchill.

The name was chosen in recognition of Churchill's role in the 1944 liberation of France. But the presence of the French head of state pays another kind of homage -- to the stature of London as one of the most important outposts for French expatriates. While the precise number of French nationals in the U.K. is impossible to pin down since registration is not required, one French official offered an estimate of between 200,000 and 250,000, including 20,000 French university students. Add to that the sizable French populations in Belgium and Switzerland and you have a brain drain that France will want to reverse if it can.

London's two biggest attractions for French expatriates -- jobs and schools -- mirror the two major reform challenges for the French government. French schools abroad like the Winston Churchill lycée are popular with well-heeled French here, but they are far removed from the troubles besetting France's highly centralized education system generally, including declining student test scores, a negative classroom environment and a harsh grading system where failure is common. One in four students fails to complete secondary school in France and more than a quarter have to repeat at least one grade. The system leaves many on the economic roadside, adding to the country's youth unemployment problems.

The new London school is an exception. Its principal came from a school in San Francisco and talks about "American mindfulness," according to one parent. "She saw the heart of American optimism that is Silicon Valley."

France could use some Silicon Valley optimism right now. As with education reform, so with economic reform more generally: Attempts to change the status quo face a mountain of opposition from unions, interest groups and whichever political party happens not to be in power. But if France is going to help its youth, it needs more than just education reform. Even those who succeed in the lycées in France are often locked out of the best jobs by a labor market that entrenches incumbency.

Those who can, it seems, leave France. Over half of French expatriates have at least three years of post-secondary school education, a higher percentage than the population as a whole. A survey from CCI Paris Ile-de-France and Deloitte, reported in Le Monde last year, showed a  doubling in the number of young people who see their future abroad. It's no wonder: Those who stay face a job market with huge barriers to entry, explaining the 24 percent youth unemployment in the country.

In its downgrade of France last week from stable to negative, Moody's Investors Service cited "long-standing rigidities in labour and product markets" as responsible for the country's low rate of growth, high structural unemployment and weak corporate profits.

Optimism will not be enough; France also needs some Silicon Valley rationalism. In both education and the economy, the culprit is the same: too many, too much, too complicated (and just fill in the blank). As the journalist-turned-academic Peter Gumbel, author of two books on the subject, pointed out in a recent article, the French education system has overtaken the Russian military in size.

In labor markets, the problems can be found in another relic: France's 3,200-page Code de Travail, a century-old rule book, wraps companies in red tape and makes it nearly impossible for employers to reduce headcount when needed to stay competitive. That, in turn, makes them loathe to take on new employees.

In its recent annual report on entrepreneur sentiment across six EU countries from the Hiscox insurance company, France stuck out. Only 43 percent of French entrepreneurs said they were optimistic about their prospects, compared to an average of 62 percent across all the countries. Unsurprisingly, 86 percent of French respondents cited excessive taxes, inflexible labor laws and too much government bureaucracy as major problems and two-thirds said their government was not supportive of entrepreneurs.

Red = 2015 Black = 2014

With the OECD, Moody's, the European Commission and others all on his back, President Hollande has abandoned his socialist roots and promised reform. But the going is slow and the government has repeatedly had to use a special constitutional tool that allows it to muscle its legislation through parliament without a vote. A bill due by the end of next year pledges to rewrite the famous labour code, but it's unlikely the nature of the employment contract or the 35-hour-work-week will be overhauled.

As my colleague Leonid Bershidsky noted in a column earlier this month, France could do worse than to look at the reforms undertaken in 2003-2005 by Germany, then often referred to as the sick man of Europe -- under another European socialist leader, Gerhard Schroeder. Mr. Schroeder lost his job, but not all do-gooders get punished. David Cameron's Conservatives won re-election this year amid a British jobs boom that owes much to corporate tax cuts and a policy of raising the starting rate of income tax (to £10,600 from £6,475), which made low-paid work a lot more attractive.

Perhaps President Hollande can comfort himself with higher growth forecasts for next year, 1.5% GDP growth, some improvements in business sentiment and continued high levels of productivity. But really slight improvements offer little comfort.

The question facing both the recently downgraded French economy and the much maligned education system is exactly the same: Can you get results by tinkering at the edges or do you need wholesale change? The students at the new Winston Churchill lycée undoubtedly have a bright future. Whether it is in France, or somewhere else, may depend on whether the incrementalism of current reforms can be replaced by something a little more revolutionary.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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