Employee protection regulation absolutely is problematic in France, because it over-protect relatively small groups at the expense of everyone else.
Small and medium-sized businesses are most affected by this. The transition from 40-ish people to 200-ish people is where the system really breaks down for French startups, because you are too big to benefit from the early-stage incentives, and not large enough to have political clout and bend the rules.
For a 100,000 euros income as a sole proprietorship, I paid 42% altogether. From those 42%, 7% were income tax, the remaining 35% were Charges sociales which covers healthcare, unemployment and retirement benefits. When French people complain about high taxes for hiring, they complain about the Charges sociales.
When ones is employed, most of the charges sociales are paid by the employer so do not come out of the employee salary (but it's the same in the end).
Honestly, it's not as big a problem in tech where wages are quite a bit lower than the US to account for the high charges sociales. But for smaller companies hiring low skilled labor or for jobs that are traditionally less paid (customer service, etc...), then it is rather high.
And to add insult to injury, the organisms that are charged with collecting those charges sociales are a complete clusterfuck. For the same year, they calculated 3 different amounts and none matched what my accountant had calculated. Closing down the business and getting out of the RSI's list took 2 years and repeated letters.
That said, I do agree with you regarding employee protection. Those regulations are helpful and should be there but there's a balance to be had between both extremes. It's the same with renter's protection in France which are way too biased against landlords and also create a lack of available apartment (coming back to France after living abroad for multiple years meant that I didn't qualify for the new unpaid rent insurance the government created and locked me out of a third of the apartments in the city I wanted to live.
Of course effective tax rate is much lower than marginal tax rate. Effective federal income tax would be 17.1%, effective California income tax would be 6.9%. This would make effective total tax 40.2% (it was 42.6% in 2017, before Trump's tax cuts).
It’s true that California taxes are high. But it’s also true that France taxes are higher. And, to be fair, bring with them higher entitlements.
And I maintain that taxes are just not high enough to be a major obstacle to entrepreneurship in France - and yes I am aware of the dreaded "charges sociales". The reason we hear so much about them is because complaining about high taxes is easy and not controversial. Unlike the topic of employee protection, which is deeply polarizing.
And I very much doubt that availability of qualified hires is the obstacle either since the level of engineering Grandes Ecoles is quite good (I might be biased there)
So, I guess factors for why France is not doing that well re startups would be Employee Protection, Kafkaesque bureaucracy when dealing with creating the company and paying the said Charges Sociales and lack of capital.
When there's a financial problem, there are multiple differing opinions as to what's reasonable.
But if you want to call the US the "only developed place without reasonable worker laws", you might want to consider Denmark. Because they don't have the opinion you're propagating.
The personal income tax rate averaged 60.45% in Denmark from 1995-2018.
Those are some of the most expensive "free" hospitals and universities I've ever heard of.
Also, the tax is more complicated than simply throwing out 60.45%. It goes:
- From 0 - 50,000 you pay 0% tax - Everything above you first pay 8% work market tax, and then from the leftover you pay - the amount you earned above 50,000 - 498,900 is 37% - the amount you earn above 489,900 is taxed 52,2%
So you don't pay 60.45% of the full amount. Never. You pay progressively as you go up.
Monthly that'll go something like, deduct 5,000 form your paycheck, deduct 8% of the remaining amount, and then 38% of the remaining amount of that. Now, what you have left is the remaining amount + the 5,000 tax free. And of course a bit more of the amount if you go into the top tax bracket.