France: Correct analysis of the effects of globalisation is crucial - Natixis

Patrick Artus, Research Analyst at Natixis, explains that it is often claimed that globalisation has led to a fall in wages and a decline in the generosity of social welfare in France which is absolutely not the case.

Key Quotes

“The problem is exactly the opposite: despite globalisation, France has maintained its high level of wages and welfare transfers. This would have been possible if France had moved up the value chain, but since that has not happened, globalisation has led to deindustrialisation and destruction of factory jobs.”

Globalisation has not led to a fall in wages or in the generosity of social welfare in France

When looking at the magnitude of imports from emerging countries, we see that the recent globalisation started in the second half of the 1990s. Since then:

- Real wages have increased faster than productivity, economy-wide and as productivity in industry;

- The size of welfare transfers has increased.

So the cost of globalisation for France is not lower wages or less generous social welfare.”

The lack of rise up the value chain

The key problem is that France has not reacted to globalisation by moving up the value chain. On the contrary, France’s positioning on the value chain has fallen compared with other countries.

Because of its low level on the value chain, France therefore has high wages and generous social welfare in competition with emerging countries. This explains the deindustrialisation and the factory job losses, and the deterioration in foreign trade for industrial products.”

Conclusion: It is important to correctly analyse the effects of globalisation on France

Contrary to what is sometimes claimed, globalisation has not reduced wages or the generosity of social welfare in France. It has led to offshoring of industrial activities and factory job losses because France has not succeeded in moving up the value chain, which would have been necessary to make it possible to keep high wages and generous social welfare.”

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