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.

President François Hollande of France listens to other leaders during a European Council meeting in Brussels, May 22
President François Hollande of France listens to other leaders during a European Council meeting in Brussels, May 22 (The Council of the European Union)

French president François Hollande recognized on Friday that his country should cut labor costs to bring down unemployment but his leftist government is unlikely to enact comprehensive reforms. Many in his ruling Socialist Party are wary of reducing social security contributions for employers or increasing work hours which they feel would erode the French social model.

Hollande said for joblessness to keep falling, the French needed “a structural policy to ease the cost of labor and improve professional training.” But he earlier rejected suggestions from the European Commission to reduce labor costs, saying French policy wouldn’t be “dictated” by bureaucrats in Brussels.

His remarks came as Les Echos business newspaper reported that the government had asked a panel of experts to explore different measures to lower the cost of labor, including changes in the financing of welfare. It used a similar method to come up with pension reforms in August which underwhelmed. While the number of years of work required to collect a pension is set to rise one and a half between 2020 and 2035, the retirement age is kept at 62. Companies are also expected to pay more into the system which only increases labor costs.

Hollande is struggling to live up to his campaign promise to bring down unemployment before the end of the year. In a radio interviewed, he touted the success of youth employment scheme which has brought down the percentage of youngsters who are out of work from a 26.4 high last year to 25.8 in October. The overall jobless rate 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 neighboring 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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