In France, a failed government for startups

Apr 14, 2016
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This year’s political debates in France have largely centered around what was meant to be major reform to labor regulations, which have left France’s unemployment rate up around 15% (near 25% for those under 25).

The task: Find middle-ground that will make it less risky, less expensive, and less restrictive for employers to hire and fire. In the beginning of March, the first version of the text was presented publicly, and its promises were wieldy: Capping France’s famously high indemnities for those who are laid off and creating a simpler formula for calculating indemnities to reduce negotiation time during layoffs.In short, France’s patrons, founders, CEOs and investors made it clear that the key to more hiring was easier firing.

….And France’s unemployed responded

The protest began on schedule, with hundreds of thousands of young, unemployed students taking to the street protesting against reforms that will reduce the rights they have once employed. What resulted was one week of “oh they’re just upset,” another two weeks of “we hear you, we’ll take it into account,” and from the fourth week of protesting on, France began negotiating with a union representing young students.

Thus began appeasement, a term which has highlighted Francois Hollande’s 4 years in office so far. The newly introduced measures include a 4-month stipend for students graduating with engineering degrees who are unemployed following graduation. To pay for it, they are increasing taxes on employers for temporary contacts (e.g: CDD), which employers have taken to using to avoid nasty firing risks. Lastly, they’ve increased apprenticeship salary minimums, which, while beneficial, likely won’t have a big impact on unemployment, according to economists.

Hollande has also announced a 90-minute live town hall meeting in the wake of a 13 percent approval rating. Polling has showed that the vast majority of French citizens are not interested in hearing what Hollande has to say, and history has shown that, following most of his TV appearances, his approval rating dips. For someone who just wants everyone to like him, it would seem that Hollande is just not like-able.

Startup Founders Suffer

Politics aside, it is obviously beneficial to tech startup founders to make hiring and firing easier, less expensive, and less risky. Even in Sweden, Spotify founder Daniel Ek has publicly stated this week that if Sweden does not loosen up employment restrictions, Spotify will be forced to recruit internationally in order to stay competitive with a fast-moving market. Regardless of your political views, if you’re a founder or an investor in a startup, it’s in your economic interest to increase economic maneuverability.

Given that the majority of job creation is coming from small businesses and the digital economy, startups represent an increasingly important percentage of employment opportunities in France. And yet, France has created a negative relationship with the world’s tops technology companies: Apple moved its Europe HQ from Paris to Luxembourg years ago; Google employs hundreds in France and is treated as a pariah; and countless others (IBM, Microsoft, Facebook, Twitter, Amazon) have been subjects of targeted attacks based on their fiscal optimization.

High-growth French tech companies like eDJing, Showroomprivé, Vente Privée, Blablacar, Criteo and others frequently receive ministers and state secretaries in their office to underscore how important they are. However, startups have made little to no headway with this administration since the Pigeon Movement of 2012. The last major reform, pushed by France Digitale, was for capital gains tax reduction, which now becomes advantageous 7 years after the launch of a company.

With only 12 months until elections in France, most citizens said they only expect changes to be made that Hollande thinks will improve his chances of winning. Then again, given how the last four years have gone, it would be surprising that anything other than nothing happen in the next 12 months.

Unfortunately, the only thing worse than re-electing Hollande for another 5 years as president of a stalling economy is the prospect of voting for any of the alternate candidates who have presented so far.

The devil you know…