Thursday, May 31, 2012

How New French Law Will Increase Unemployment among the Unskilled

The new Socialist French government has issued guidelines limiting CEO pay to 20 times that of the lowest paid worker.

So if I am a CEO, I start eliminating as many low paid employees as possible, and I certainly stop hiring them. For me, it becomes about mechanizing low paid work, and hiring only high paid workers.

If I have workers on the payroll earning the French equivalent of $10 an hour, I am getting them off the payroll pronto. And therein lies some of the wackiness of central planning, a new intervention needs to be created to "fix" the untended consequences of the first intervention.

20 comments:

  1. I guess he is assuming not every CEO works on prudential reasoing only?

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  2. The mass layoffs will just be blamed on greedy capitalists.

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  3. My favorite unintended consequences story is when the fur activists successfully drove down demand for seal skins and the price fell in half, what did the Inuits have to do in order to pay their bills. Yep, that's right... Kill TWICE as many seals. (True story from an in-flight magazine of a regional Canadian airline in the Arctic)

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    1. While I appreciate the exploration into the law of unintended consequences I don't believe its possible to explain the doubling of seal kills from demand destruction.

      How can one sell twice as many units when demand is falling? Whatever magic they are using I would like to get some of my own.

      If you mean instead to say that the price was driven down by half for whatever reason, then I can believe twice as much product needed to be produced to create the same amount of revenue.

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  4. Socialists: Making everyone equally worthless since 1848.

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    1. Isn't that the year of Bastiats' death?

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    2. Nah, Bastiat died in 1850. Close though.

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    3. Is that the year Marx published The Communist Manifesto?

      And I would be willing to guess that wage controls go way back. Like a long long time ago.....sadly enough

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    4. "Is that the year Marx published The Communist Manifesto?"

      Ding! Ding! Ding!

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  5. And of course, the best executives and entrepreneurs will end up in other EU countries with companies that can offer them more money, leaving only the incompetents who can't find better options elsewhere to steer French companies into the tarpits.

    Do they even acknowledge this fact as a trade-off? It's such an obvious consequence to me, but I actually think for two seconds before making decisions.

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  6. Then the the newly unemployed unskilled workers will go on the doll (still pretty generous in France)until the rest of the working French get super pissed and change more socialist government for less socialist government again.The French will not work beyond 32 hrs a week anyway.So it goes.

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  7. I don't know what its like in France but I would never serve as a CEO in the US at a public company for less than $2mil/yr. There is certainly no way I would do it for a lousy $200k/yr. I would rather go work for a private firm that has no limits. I've been an exec VP in a midsize public company and its without a doubt the worst experience of my life. The pressure is incredible and after SOX it made the job downright dangerous to your personal wealth. Ask the Zuck how he likes running a public company now. Everyone loves you when you hit your numbers and give great guidance, but trip up even even once, and your life becomes a living hell. You will have everyone in your face, from the little old lady that owns 100shares to analysts looking to glean information that is in violation of reg FD.

    Who knows how French companies will deal with this, but you can bet that in the end it will be shareholders that will lose (read pension funds). You can expect that private firms are going to have a bonanza stealing top talent from the public firms and I'll bet that there is going to be a lot of talent heading offshore. My guess is that there will be a back door means developed to fairly compensate CEO's, otherwise, you can expect that your average French company will be run by mid level managers. Definitely a strong sell on french stocks and forget anyone taking a company like facebook public in France.

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    1. Or potentially the CEO position would become a figurehead position and the real Boss serving in the de facto capacity of CEO would be called the Executive Director of Corporation. Or something obscure.

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  8. Even the largest of companies need people to sweep the floor, answer phones, handle simple accounting. I guess we will see how creative French companies can get with contracting out as many positions as possible.

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  9. Socialists...how many times does your infantile religion have to fail before you'll admit that this sickening and mindless ideology is for MORONS only? It...does...not...work! Get that through your thick f***ing skulls!

    Am I getting through to you? Am I making contact?

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  10. I would just outsource all non essential jobs. Essential would be defined as those with proprietary information or skills. IOt is probably good management policy anyway.

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  11. "The new Socialist French government has issued guidelines"

    Are these "guidelines" law or only potential law?

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  12. You're not suggesting that there might be unintended consequences from some idiotic, ill-considered gov't plan, are you?

    For his next trick, Holland will show us all that the earth is indeed flat.

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  13. Now the government needs to make it illegal to fire people. Then they will require people to hire people. Then spend more money. Then go into more debt. Then raise taxes. Then print money. Then "austerity". Riots, rebellion. All of the protesters will be blaming capitalism, of course.

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  14. Prime example why you should NEVER hire anyone, always subcontract labor.

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