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The Medium-Sized Companies lose jobs… as the other companies

Monday 19 September 2011, by Rose Blackburry

After all the advertising done about MSCs (medium-sized companies, 250 to 2,000 employees), we wondered if these companies could be the salvation for the French economy and play the same role that they have in Germany, in the Mittelstand. For this purpose, we looked at the evolution of companies listed as MSC in 2004 and the following years (2004 to 2009).

MSCs and job destruction

The results obtained are consistent with those published by the Banque de France: MSC lose existing jobs at the same pace as the rest of the French companies.

If the total MSCs employment does not decrease or slowly, it is due to new MSCs appearing from smaller companies, SMEs (less than 250 employees).

We can worry about the job destruction rate of MSCs, as for the rest of French companies.

The statistics we have show that the job destruction rate is around 3.3% of existing jobs per year for French companies and is around 3.5% for MSCs as shown in the table below:

Classification at the beginning of the period
Number of companies
Employees 2004
Employees 2009
Independent MSC - Manufacturing
93 698
78 256
Independent MSC - Others
307 015
241 243
MSC part of small group - Manufacturing
467 432
399 787
MSC part of small group - Other
1 326
730 926
619 389
TOTAL MSC 2004 (in 2009)
3 039
1 599 072
1 338 674

Some people wonder whether France, which creates few jobs, destructs fewer jobs than high job creation countries, as the U.S., and if France is less subject to «Schumpeterian» turbulence. Looking to MSCs, the answer is unfortunately NO compared to the US figures.

The figure above shows that, due to SMEs becoming MSCs, the job destructions were compensated and the MSC stock employment has slightly increased but not fast enough to catch up the gap with United Kingdom or Germany.

Does Government can help MSCs?

The idea that the Government could somehow slow the fall of job creation through financial help to the MSCs is totally unrealistic. Indeed, the MSCs represented more than 262 billion Euros of equity in 2007 (Alisse database - INSEE) with a bottom line of 28 billion Euros.

To increase significantly these results, it should be relevant to reduce the social charges of the MSCs by several billion Euros what can only be done by transferring charges to other companies because of the current state of the Government finances.

The solution is not to rob Peter to pay Paul, but to significantly increase the existing pool of jobs to increase the French tax base. This can be done only by increasing strongly the creation of employer firms (with at least one employee) whose financing cost is nothing (a study on tax returns on the businesses created in France showed that VAT in the first year exceeds 25% of the equity - Advantage Madelin - for companies with equity under 10 million Euros - the Small Enterprises as defined by the European Community).