Unemployment in France

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What caused unemployment in France? This is the underlying question, reading through the case, it is apparent that many influential people, be it, high ranking officials in the French government or students like us at Thunderbird, have all tried to understand the root problem. Many measures were taken in France during those times of crisis, however it is clear to me that all of the laws they have adjusted during that period of 1981-1994, have been “Kneejerk” reactions, rather than a sustainable solutions for French unemployment. Francois Mitterrand came to power in 1981, and at the time the French unemployment rate was rising fast, actually to be precise, the unemployment rates started rising in 1975. Till 1975 the French unemployment rates had remained quite low, and slowly that rate started increasing. Many people blamed the higher rates of unemployment on a decline in labor productivity growth. In other words the industrial revolution hit them, and unlike their neighboring countries the French weren’t ready for the computer age. And when Mitterrand, a socialist, was elected president in 1981, he had an agenda which would help lower the rates. He drastically increased the minimum wage, increased benefits, reduced the working hours to 39 and added an extra week vacation. I mentioned “Kneejerk” reactions in my introduction, and I believe that the measures that the President took in his first year in office were just that. Sure they helped in the short term; by 1985 inflation was down to 5.8% from 13.4% when he first took power. The current account deficit also fell drastically from 12 billion in 1982, to 35 MILLION in 1985. He also helped create a 100’000 jobs. However the unemployment rate kept rising. So the problem was still there, and the worst part was that the rate was still rising. Following these results in 1986 the conservative party won control of the National Assembly, and they selected Jacques Chirac as leader of the coalition and Prime Minister,...
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