Recently elected socialist French president François Hollande.

While I’m not sure I always buy whole-hog the amorphous concept of “regulatory uncertainty,” brought on by the administrative state, as a catch-all explanation for everything wrong with the private sector and our nation’s current unemployment crisis, a fascinating Bloomberg Businessweek Global Economics feature from May 2012 looks at French labor policy (emphasis mine):

[France] has 2.4 times as many companies with 49 employees as with 50. What difference does one employee make? Plenty, according to the French labor code. Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones.

In the U.S. we talk a lot about compliance costs associated with the regulatory state; companies hire legions of attorneys and accountants to make sure the books are squeaky clean and that operations comply with government mandates. Free market proponents argue (correctly in my view) that capital dedicated to those particular human resources could, in general, be applied to more productive ends, and everyone would be better off. Sarbanes-Oxley compliance, for example, takes a lot of high-skill man hours to achieve. High-skill man hours mean high-dollar salaries, and those salaries and man hours are both quantifiable; they can be put into monetary terms when calculating the cost of the regulatory burden.

In France, according to the article, unemployment is the cost. We can count the unemployed, sure; but it is more difficult to count the number of unemployed whose situation can be explained by companies’ inabilities to achieve economies of scale because of burdensome labor policy that keeps companies small. That doesn’t mean it’s not worth considering or reforming.

Image courtesy of Wikimedia Commons.