There is a musical theater near where I live which has a very active and wonderful season. It produces a number of operas. We all know that operas are long and theater halls pretty hot. As a result there are intermissions, during which the thirsty people rush to the bar. At the bar there is a single waiter who is visually impaired. Despite that, he does an extraordinary job at attenting everyone he can, delivering the drinks at an incredible speed. Managing all these customers in the limited intermission period is a stressful and physical activity. Despite all his efforts, there is so much congestion that many people give up on the possibility of buying a drink. The price of a glass of Champagne is 10 Euros. There are perhaps 8 glasses in a bottle, and let’s say the bottle costs 20 Euros to the theater. The theater makes 7.5 Euros per glass sold. The hourly cost of an employee (who could for example be a student) is around 10 Euros. Make it 20 with payroll taxes. This means that the theater would recoup the cost of an extra employee, paid one hour, if only that person sold 3 extra glasses of Champagne. While space is limited, the bar can accomodate more than one waiter — at least 3, perhaps 4.
I can only speculate why this highly profitable transaction does not take place. Presumably the new recruit will only be employed a few hours per week. While regulation makes this increasingly difficult (what’s the point of having a socialist government if it does not reduce economic freedom?), it is not impossible. It is possible that local unions block such hirings, out of an ideological stance against “precarious” forms of labor (they prefer people to be on the dole). It could be employment protection, which makes it difficult to get rid of the worker if something goes wrong. It could be a lack of managerial incentives, since the theater is indirectly State owned and has little incentives to maximize profits. Or it could be the general cultural aversion toward hirings which pervades French society. Since the early eighties, when a host of restrictive labor laws was implemented, rationally inattentive managers have adopted this simple strategy: only hire when strictly necessary.
My other example comes from a TV program, which described how French driving schools were being opened in Barcelona. The French driving license is aberrantly difficult and costly to obtain. I was supposed to know the formula for kinetic energy, the meaning of signs that were only relevant for trucks my potential license did not allow me to drive, and many other irrelevancies. Things do not seem to have improved since then. In particular, according to the TV program, the administration in charge of running the practical part of the exam is under-staffed, an ironical feature in a country where 25% of employees work for the government. As a result, people have to apply for that part months in advance, and, if they fail (which is frequent), they lose another six months. Many people, especially among the low skilled, cannot find a job because they do not have a driving license. Furthermore, while waiting for the exam, people continue to take regular driving lessons. At the end of the day, their driving license has cost them a fortune. The extent to which the driving school is coercing them into taking all those lessons is unclear to me. Why don’t people apply six months in advance and start taking driving lessons, say, two months before the exam? The sector is somewhat open to competition but once one has elected a school, it processes your application to the exam, so it has some power over its clients.
In any case, according to the TV program, in Barcelona one can take the exam 12 days after applying. Furthermore, wages, labor taxes, and gasoline taxes (an important cost item for such a business) are substantially lower there. And by virtue of the European Single Market, Spanish driving licenses are, I suppose, recognized in France. So people find it worth to purchase a low cost plane ticket (thanks to air transport deregulation), rent a room for a month there, and take the exam. Hence, some clever French people opened a driving school, thus giving lessons in French to their French clients. And the Single Market, again, guarantees that the Spanish or Catalan authorities cannot prevent them from running their business.