French Premier Announces Long-Awaited Labor Reforms

Manuel Valls proposes to open up protected professions and make it easier for firms to lay off workers.

French prime minister Manuel Valls arrives at the Elysée Palace in Paris, April 4
French prime minister Manuel Valls arrives at the Elysée Palace in Paris, April 4 (Elysée)

French prime minister Manuel Valls announced a package of long-awaited economic reforms on Wednesday that at least some members of his own Socialist Party are likely to resist.

“We need to unblock the economy, liberate energies, lift constraints,” Valls said. Responding to criticism from within his party, he added, “Sometimes you have to choose risk over rent, immobilization, conservatism. The French are ready, often more than their leaders.”

The plan includes many of the measures floated by economy minister Emmanuel Macron in October, including allowing businesses to operate on Sundays and opening protected professions such as pharmacists and notaries.

It would also make it easier for companies to fire employees and reduce nonwage labor costs which currently make up a third of the average salary.

Labor costs in France, at €34 per hour, far exceed the European average of €23.

Although leftwingers and trade unions fear an erosion of labor protections, Macron and Valls, both centrist social democrats who were appointed by President François Hollande earlier this year in a shakeup of his cabinet, insist changes are needed to make the French economy more competitive.

France is expected to post under .5 percent growth for the third year in a row while unemployment has been over 10 percent for the last two years.

The country is also under pressure from other European Union member states to rein in its deficit. It has repeatedly missed deadlines to bring its shortfall under the 3 percent treaty limit. It was given a three-month extension by the European Commission last month to present a credible fiscal plan. If it fails to make good on its promises, it could be fined.

Stifling job growth is the excessive protection of dozens of professions whose members guard access though exams, licenses and high buy-in costs.

The number of notaries, for example, is fixed at just over 9,000. Aspiring notaries must be nominated individually by the Justice Ministry after seven years of study and can only open a practice if they buy one from a retiring notary and are accepted by senior notaries in the region.

There is also a shortage of taxi drivers, especially in Paris. The capital has fewer taxi drivers today than it did in 1920. Previous governments balked at opening up the market when taxi drivers invariably went on strike.

Small businesses are discouraged from expanding by the difficulty of firing underperforming staff and rules that say it must create work councils and introduce profit sharing when it employs more than fifty workers. Higher income tax rates introduced under Hollande have also helped convince many French entrepreneurs to seek better opportunities abroad.

Even if many Socialist Party lawmakers are skeptical of liberalization, Hollande and his ministers can ill afford to do nothing. Besides the threat of a European Commission fine, they face daunting electoral prospects. Hollande, who won the 2012 presidential election against the conservative Nicholas Sarkozy with 51.6 percent support, is the last popular French leader in decades. His party is almost certain to lose the next parliamentary and presidential elections in 2017 and could even place third, behind the Front national.