Consultancy Report on Subsidiary Business in France

1. Executive Summary

This consultancy report aims to analysing France market from four main perspectives of corruption, informal sector, minimum wages and education in order to provide valuable conclusions for Sheds-for-Dads company expanding in France.

In the first introduction section, general information would be presented as overview on France. Second section would focus on corruption level of France on the basis of transparency international data and relevant policies and corresponding result would be put in account for section conclusion. In next section, analysis on France informal sector would be given in terms of informal economy rate and main elements of the sector and other research findings. The fourth section puts emphasis on minimum wage in France, also known as SMIC, from aspects of employment determination legislation and recent trend, leading to evidence of high minimum wage. The next education section introduce basic education plan and relevant factors and chart information of three education level rates. As for the last section, critical conclusion based on the analysis above is conducted as deprecating Sheds-for-Dads company’s expansion plan in France.

1. Introduction

France has been regarded as one of the most modern countries around the world and plays leader told among Europe countries.  Currently Franc is in the period of president election and thus the election result may influence company business through policy change. For instance, assuming candidate Macron wins the chancellorship, policy may be conducted to incentive France economy, resulting in the loose currency policy. Nevertheless France possesses abundant plant resource with 27 percent forest coverage rate (according to CIA Factbook, 2016) and expertise in plant fostering, Sheds-for-Dads is likely to encounter with high cost of wood due to the strict forestry policies.

1. Levels of corruption

According to Corruption Perception Index 2016 presented by transparency international,  France was ranked at 23 with score of 69. These figures indicate France may not be a highly transparent country as major european countries ranked within top 20 in the table below.[pic 1]

http://www.transparency.org/news/feature/corruption_perceptions_index_2016

Regarding policies addressing corruption issues, new anti-corruption law ‘Sapin 2’ was passed on November 2016 as a breakthrough in terms of legislation against corruption. Nonetheless, the greater emphasis on fighting foreign bribery and the whistleblower protection requirement will not be enough to meet all the challenges posed by the fight against corruption in France.In France 2013, according to Le Figaro the law of separation and regulation of banking activities was diluted significantly following intense lobbying by the sector as well.

In terms of government institution, anti-corruption agency was not fully authorities under the circumstance of  being placed under of joint of authority of Justice and Finance ministries.

To conclude this section, scale and effectiveness of corruption in France, especially financial lobby is quite relevant. France may not be a satisfying country for company investment in terms of corruption problems.

4. Informal Sector

The term ‘the informal economy’ was introduced for the first time by the ILO during the 1970s to

describe certain types of work that were not being captured or recorded in official government statistics on employment.

According to ESS data, informal sector rate in France in appear to be quite low among European countries, proved by table below.[pic 2]

Source: Formal & informal employment rate, ESS

In most west european countries (including France and UK), strong apprenticeship culture results in the view that informal apprenticeships might be seen as a natural complement to the formal apprenticeship system.

Many researches (e.g. Chloé et al, 2014) also states that none of the minority or immigrant groups features a higher informality rate than the native employees probably because the loose regulations on and proper support for immigrant.

In France, self-employed is the dominant element of informal sector and according to ESS data.

According to government regulation, most company has to offer CDD (Contract Duration Determinée) contract to their fresh employee and then change it into CDI (Contract Duration Indeterminée), which indicates a firm and stubborn employment relations, which help to decrease the informal sector. That might be another reason lower informal economy rate is seen in France compared to UK.

[pic 3]

In conclusion, Franc appears to be a formal market to investment since research states higher informal sector rate may lead to unhealthy market operation in terms of regulation and workforce.

5. Employment legislation and government policy relating to minimum wages

Minimum wage, also called as SMIC (salaire minimum interprofessionnel de croissance), currently is €9.76 per hour for the gross minimum wage and 1153 per month for net minimum wage in France. From the figures in the table below, The French minimum wage saw a steady rising trend for the last 10 years.[pic 4]

source: minimum wage trend, http://www.liuxue.com/fra/news/54432.html

The French minimum wage is adjusted annually on 1 January of each year by the government, after it receives non-binding advice from a group of experts.  According to a decree, the mechanism of determination on minimum wage appears to be quite complex compared to that in UK. The minimum wage is ‘indexed to inflation (apart from tobacco) for households that belong to the lowest disposable income quintile’. Half of the growth in purchasing power of the average hourly wage for workers and employees is added to the result. In case that inflation exceeds 2% during the year, the minimum wage is automatically adjusted and thus government have authority to increase the minimum wage above the calculated rate. [pic 5]

source: Determination of minimum wage level, https://www.eurofound.europa.eu/observatories/eurwork/articles/working-conditions-industrial-relations/statutory-minimum-wages-in-the-eu-2016

Christian Noyer, the President of the Banque de France stated that France needed to make the minimum wage ‘more flexible and that it could be set on a regional level’. According to him, it could be temporarily decreased to facilitate the hiring of certain groups of people such as the young and low-skilled workers. This suggestion was supported by other economists. A study published by Institute Montaigne highlighted that the minimum wage has increased between 1990 and 2010 by 28% against a 10% increase in the average salary. The minimum wage is considered to limit the entry to the labour market for low-skilled workers. However, the government refuses to reduce the minimum wage level in view of the high costs of housing.[pic 6]