Macron Makes Start with Labor Reform in France

The changes aren’t overly ambitious and stand a good chance of being rubber-stamped by parliament.

French president Emmanuel Macron has unveiled his first labor reforms:

  • Capping the damages judges can award to employees who have been wrongfully terminated.
  • Merging workers’ councils in companies.
  • Enabling employers to go around workers’ councils — which are often dominated by trade unions — and call company-wide referendums on sensitive topics like overtime.
  • Allowing multinationals to lay off workers at loss-making French subsidiaries even if the foreign-based parent company is profitable.

“The idea is to loosen the rules while also ensuring safeguards for employees,” Muriel Pénicaud, the labor minister, said.

She confirmed that the government would introduce the changes as “ordinances”. That way, lawmakers only get an up-or-down vote and no chance to amend the reforms.

This shouldn’t be a problem. Macron’s centrist party has won a comfortable majority in the National Assembly. Many deputies are new to politics and owe their position to Macron.

It’s a start

The reforms are a start, but only a start.

“There are interesting measures, but it’s not the big decentralization of labor relations Emmanuel Macron announced during his campaign,” Patrick Artus, the head of economic research at Natixis bank, told the Financial Times.

As economy minister from 2014 to 2016, Macron simplified layoff procedures and gave small companies more flexibility to negotiate wages and working conditions with their employees.

The law still makes it hard to fire workers who are on a long-term contract, however, which helps explain why short-term and non-contracted work has skyrocketed. Many young workers are stuck in a cycle of low-paid internships and short-term contracts.

One in five youngsters are without a job altogether. The general unemployment rate fell below 10 percent this year for the first time since 2012.

What’s next

Other things Macron could do to boost employment include:

  • Liberalizing entry barriers and fees. France’s Inspectorate-General of Finances has calculated this could add .5 percent to economic growth over the next five years and create 120,000 more jobs.
  • Eliminating the 35-hour workweek by pushing up the threshold at which overtime pay kicks in.
  • Reducing social security contributions for employers. This is a major reason why French workers are more expensive than their European peers.

None of those reforms would be acceptable to the trade unions, though.