France’s Hollande Laments High Labor Costs But Unlikely to Act

The French president recognizes that labor costs are too high, but his Socialist Party is resistant to changes.

French president François Hollande greets Italian prime minister Enrico Letta in Paris, May 1
French president François Hollande greets Italian prime minister Enrico Letta in Paris, May 1 (Elysée)

French president François Hollande has recognized that his country should cut labor costs to bring down unemployment, but his leftist government is unlikely to enact comprehensive reforms.

Many in the ruling Socialist Party are wary of reducing social contributions for employers or increasing work hours, which they feel would erode the French social model.

Structural policy

Hollande argues that for joblessness to fall, France needs “a structural policy to ease the cost of labor and improve professional training.”

But he has rejected suggestions from the European Commission to reduce labor costs, saying French policy won’t be “dictated” by bureaucrats in Brussels.

Policy by committee

Les Echos business newspaper reports that the government has asked a panel of experts to explore measures to lower labor costs, including changes in the financing of welfare.

It used a similar method to come up with pension reforms in August, which underwhelmed.

Promises

Hollande is struggling to live up to his campaign promise to bring down unemployment before the end of the year.

In a radio interview, he touted the success of youth employment schemes, which have brought down the share of youngsters who are out of work from a high of 26.4 percent last year to 25.8 percent in October.

The overall jobless rate still stood at 10.9 percent that month, the same as the European average but higher than it’s been in fourteen years and more than twice the rate in Germany.

France’s hourly labor costs, at €34, far exceed the European average of €23 and are seen as one of the main reasons the country is struggling to recover from the global economic crisis.

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