Don't be like French Students!

As you may be aware, France is being brought to a standstill by industrial action at the moment. The beef is that the retirement age is being increased from 60 to 62. In case you thought you might have misread that, you didn't. Even after the increase, the French will be retiring at least three years before Brits. And of course, they limit working weeks to 35 hours also, so while they are working for that shorter timespan, they put in less hours.

Of course, that's a very general argument and doesn't take into account how hard the French work in that more limited time - it may be they are more productive because they get more rest.

Nonetheless, students are rioting too about this! What is their rationale? Apparently they fear that because old people will be retiring later, there will be less jobs for them when they (eventually) finish their studies.

This highlights a mistake that as keen economics students Martin and I would like you to never make: The economy isn't a zero-sum game. I.e. there isn't a fixed number (say 40m) jobs to go around meaning that if one job is taken by one person, that's one job less left in the economy. The economy is a dynamic place where opportunities are constantly arising to set-up business and provide a product/service. Hence the potential number of jobs is always changing and so the economy is not a zero-sum game in economist speak.

So these students are perhaps even more deluded than the students that speak out on behalf of the NUS in the UK.

Strikes Ahead

The TUC (Trade Unions Council) are backing joint strikes if planned Tory Coalition cuts go ahead, it has been announced today.

I generally don't back old Labour, lefty stuff like this: I find unions too militant, and usually too ignorant of economics.  Those of you studying econ101 this coming year will find out exactly why unions often cause more harm than good.

However, they don't necessarily always cause more harm than good, for many reasons.  The first, of course, is when employers are simply wielding disproportionate and unfair power as a single employer of many people.  Collective action on the part of workers can hope to match the employer for bargaining power and strike a better agreement for workers.  Classical economists might complain that this distorts the market value for labour, but does it really?  Is the market value really what employers set for wages, particularly when they wield some kind of market power?  You'll learn about the monopolisation of markets in econ101.

Furthermore, should the cuts go ahead?  There's little doubt that the deficit is very large currently, but is that an excuse to wield the axe left, right and centre, as the Coalition is planning?  Some very interesting analysis can be found by Chris Dillow at a blog called Stumbling and Mumbling that I'm a big fan of: The fact is that no government has the kind of knowledge that the Coalition is talking about using to make these cuts fair because nobody can have that kind of knowledge except God (if he exists*).

So given this, I'm actually sympathetic to the Unions and I hope that collective actions on the part of the masses can force this Coalition to rethink.  Governments can be incredibly arrogant creatures at the best of time; lets see just how arrogant this one will be...

(* - I believe he does. See here if you're interested.)