French Labor Reforms Once Again Underwhelm

François Hollande likens joblessness to a “state of emergency” but walks back earlier liberal reforms.

French president François Hollande speaks at a conference in Paris, January 12
French president François Hollande speaks at a conference in Paris, January 12 (Elysée)

French president François Hollande unveiled €2 billion worth of job-boosting measures on Monday in an effort to bring down unemployment ahead an expected reelection bid next year.

Likening France’s persistently high unemployment rate to a “state of emergency,” the Socialist Party leader announced the creation of half a million vocational training schemes, new apprenticeships and subsidies for small companies.

“We have to act so that growth becomes more robust and job creation more abundant,” the president told business and labor leaders in Paris.

Hollande earlier vowed now to seek reelection in 2017 if unemployment hasn’t come down by then. The rate has been stuck at 10 percent since he was first elected in 2012.

Return to form

The latest policies are return to left-wing orthodoxy after Hollande earlier tried to boost job growth through €40 billion in business tax cuts over three years.

His government also liberalized Sunday shopping and intercity transport last year but needed to push the reforms through by decree. Many Socialist Party lawmakers had signaled their intention to vote down the changes.

Hollande started walking back his centrist turn in September when his government announced additional reforms that disappointed employers.

They included allowing some companies to opt out of particular labor regulations and negotiate working conditions directly with their employees rather than trade union representatives.

Proposals to push up the threshold at which overtime pay kicks in to forty hours per week, as is the case in most other European countries, and ironing out the differences between typically older, insider workers who enjoy full labor protections and younger outsiders who can only find temp jobs were abandoned.

France has long been urged by the European Commission and other international institutions like the Organization for Economic Cooperation and Development to simplify its layoff procedures and make hiring less expensive.

Excessive regulations and high social security contributions hinder labor mobility, they say, and add to labor costs which, at €34 per hour, far exceed the European average of €23.

Disappointment

Liberals and labor experts were again disappointed on Monday.

The business magazine Challenges argues that the president is at least making it less expensive for firms to hire — if through subsidies. But if unemployment is really tantamount to a “state of emergency,” the magazine says, the measures Hollande announced on Monday fall well short.

Le Point, a conservative weekly, is even less sympathetic, calling the creation of more training programs a “magic trick” because it will allow the government to officially discount 500,000 jobseekers as unemployed without giving them work.

Nicolas Lecaussin, the head of the liberal Institute for Research in Economic and Fiscal Issues, told the Financial Times, “Training schemes are controlled by unions and efforts to boost apprenticeships have failed repeatedly over the years. As always when presidential elections loom, we’re entering a phase of public spending increases.”

The British newspaper itself calls the latest reforms a missed opportunity.

A reform of the labor code — the last big piece of legislation expected before the presidential elections — should be an opportunity to make more fundamental changes. It is disappointing that Mr Hollande has already significantly limited its scope: promising not to touch the sacrosanct 35-hour work week or the permanent contracts most in need of reform.

Polls have shown that up to 70 percent of the French favor getting rid of the 35-hour work week. Most already work more hours anyway: 37 per week on average, according to the OECD.

Yet it remains the third rail of French politics.

The right can’t touch it without confirming deeply-held suspicions that, despite decades of statism, it is still committed to “neoliberal” reform.

Hollande won’t dare raise it for fear of bringing the trade unions to the streets and fracturing his left-wing coalition.