LFull employment is an objective reaffirmed by Emmanuel Macron. Without a doubt, unemployment has fallen significantly for several years and has reached a floor of around 7%. However, we are still far from full employment as defined by economists, around 4%. From now on, France is faced with threats of stagnation and the start of a rise in unemployment.
How can we reverse the current dynamic and get back on the path to full employment? Should we question economic policy centered on supply alone? We must bear in mind the major observation of the significant increase in the share of profits in income since the “thirty glorious years”, in all advanced economies, while at the same time economic growth has continued to slow down sharply, even to stagnate for several decades, as exemplified by Japan.
In addition, it is shown that employment growth is maximum for a distribution of two thirds for wages and one third for profits, i.e. an average share of profits more limited than currently. There is in fact an incentive to create jobs when the share of profits is less than a third, but to destroy them otherwise. This observation is confirmed by the analysis of seventeen advanced economies over the last six decades. The policy of supply, preeminent during this period, only works successfully if it generates additional demand, in other words if there is a chain reaction between increases in supply and demand, as theorized in 1972 by the British economist Nicholas Kaldor (1908-1986).
Investment effort
France followed the general trend with a share of profit rising from 27% to 36% until the financial crisis of 2008. Unlike most other developed economies, the share of profit then declined to return to a value close to 33%, i.e. the “ideal” distribution, according to the theoretical model that we advocate. This better distribution has surely favored the creation of jobs and the reduction of unemployment in recent years.
But behind this seemingly ideal average lie large disparities between companies, large and small. Those of the CAC 40 have a very high share of profits, 44% of added value, while they destroy jobs. On the contrary, in SMEs [petites et moyennes entreprises] and ETIs [entreprises de taille intermédiaire], the share of profits is lower than the optimal value, and they create jobs. We must modify this distortion linked to the size of companies, which is not simple a priori. The most effective would be to increase investments for the future, which would allow the creation of jobs and, ultimately, the rebalancing of distribution. To do this, we must return to an investment rate of 24% of GDP, or 2 points more than today, in order to return to average growth, close to that of France between 1994 and 2008.
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