France in Crisis

Smith, a historian, argued that the French social model does not do what its defenders claim, and that it protects those who already hold secure positions at the expense of those who do not.

His central claim concerns distribution. French social spending is among the highest in the world as a share of output, and the model is defended as a commitment to solidarity. Smith argues that most of that spending goes to pensions and to health for older cohorts, and that the pension system in particular transfers from working-age people to retirees whose incomes are already above the working-age average. Meanwhile spending on the unemployed, on the young, on housing and on immigrant communities is comparatively low.

His second claim concerns the labour market. Employment protection applies to those holding permanent contracts and raises the cost of hiring, which produces persistently high unemployment concentrated among the young, immigrants and people in the housing estates outside major cities. Insiders hold protected positions while outsiders cycle between temporary contracts and unemployment. He argues that the unions defending the system represent public sector and large-firm employees, meaning the insiders, rather than the people the model is claimed to protect.

His third claim concerns the public sector, whose employment conditions, pension arrangements and retirement ages he argues are substantially better than those in the private sector and are defended by the groups best placed to strike.

Smith writes as a critic and the book argues a position throughout. The insider-outsider analysis is a recognised framework in labour economics and the French case is a standard example. His treatment gives limited weight to what the model achieves, including low poverty among the elderly and universal healthcare. The book is from 2004 and the subsequent reforms and political developments have changed parts of the picture.