The French President, François Hollande, has only just over a year left of his term in office and is beginning his final push to meaningfully reduce the level of unemployment in France, which has stubbornly remained at high levels since the Financial Crisis broke in 2008. “We may have a state of emergency on the security front, but we are also in an economic and social state of emergency,” President Hollande said at the end of 2015. With French unemployment still high since his presidency began, President Hollande has repeatedly said that he will not run for a second term if he cannot bring French unemployment down at a sustainable rate before 2017. With time running out, and Front National (FN) on the rise, reinvigoration of the French economy is looking more and more desperately needed.
French unemployment still stands at around 10%, however recently announced plans by the government look to be President Hollande’s final push to tackle the persistent problem of unemployment before France enters its presidential race 17 months from now in 2017. An article in POLITICO Europe reported this week that the French government intends to fund training programmes, apprenticeships and other employability-boosting programmes to 500,000 people, with investment of around €2bn to provide support for people to find jobs under France’s current system. Technically, by providing training and apprenticeships for people, this will technically lift them out of unemployment and therefore improve figures. The plans have been criticised for artificially lowering unemployment, though President Hollande has rejected these statements. There are political reasons for going down the state-support route rather than active reforms of the current rules, including avoiding the ire of the left-wing of his party, which looks to be set to give the President trouble over his planned constitutional reforms, and will not support the more far-reaching reforms to the French labour market. Nevertheless, similar state-funded moves to provide temporary employment have failed in the past to actually make the unemployment figures in France budge. The economy remains the last stain on President Hollande’s recent track record, having well-acquitted himself in the aftermath of the terrorist attacks on 13th November, and hosting the successful conference on climate change in Paris; COP21. However the last outstanding issue plaguing his presidency is the economic state of the country which has failed to improve over the past 4 years.
The President’s plans come as the AFP report that French unemployment grew by 0.4% in December; the increase in 2015, bringing the total to around 3.6 million people, was 2.6% overall, which the Labour Ministry stated was the smallest increase since 2010. Nevertheless, this puts French unemployment at an 18-year high. France remains the only large European country not to have seen a marked improvement in its unemployment figures, with Spain, Italy and Portugal all having recovered from the impact of the 2008 crash. The President has championed previous reforms, such as lowering corporate tax rates by €40bn, which were believed to hep target the main issues facing businesses in France – high costs, particularly labour costs. Other reforms which have been driven forward together with the centrist Economy Minster, Emmanuel Macron, include an improvement in labour relations between companies and trade unions, the wider opening up of professions and an end to the taboo of doing business on Sundays. The impacts of these changes were mirrored by movements in the French economy, however nothing that will sustainably reinvigorate employment figures or leave a major impact, and have been seen as too incrementalist by many observers. A final move on tackling unemployment was announced last September, which were described by Jean-Hervé Lorenzi, an economist at Le Cercle des économistes, as amounting to ‘we’re not going to change the law but we’ll give you ways to circumvent it.’
It is this resistance to pass far-reaching reforms that means the French economy has remained in the doldrums, according to some observers. The FT described the President’s announcements as “a missed opportunity to fix France’s jobs market”. Another article published last September reported that the French labour market was “dysfunctional”. In the article last week, the commentator highlighted that they followed the old principles of previous attempts to bring the economy into recovery; by focussing on state support instead of actual reform, President Hollande’s plans will target the symptoms rather than the root causes of the problem. The FT argues that whilst this serves political objectives, including keeping the left wing of the Parti Socialiste (PS), they will not actually affect the structural problems at the heart of the economy. The President is in a tight position here however; he is in the late stage of the electoral cycle, and lacks a majority in the Sénat, key to passing any major reforms. The POLITICO article outlined 3 major problems in the French labour market; the 35-hour work week, which defines any hours worked over the 35 limit as overtime, which there’s a limit on, the huge disparity between the CDI (indeterminate length) contracts, which in terms of job security are ‘ironclad’, and the CDD (fixed-term) contracts, which are very flimsy and undesirable. Finally, there’s the 50th-worker rule, which forces companies with 50+ workers to allocate facilities and time for employees to set up workers’ councils, which whilst may sound positive for workers, has left France with an abnormal number of companies with only 49 workers. Furthermore, pay-structures are determined by the government and traditionally there has been no collective bargaining in France.
My own research on these problems has yielded mixed results; the 35-hour week does have its cons, however French workers have a very high productivity, higher than the UK, and work more hours per week than German, Dutch or Danish workers, according to the OECD. Furthermore, the average wage in France, whilst much higher than the OECD average, ($64/hr) is in fact lower than the average American wage ($67/hr). The rule does not apply to managers either, and of course the employee is able to work overtime. According to the FT, the 35-hour week is not the biggest problem in the labour market. Nevertheless, according to the think-tank Institut Montaigne, most French people support a relaxing of the law; Minister Macron has even said that the law was a bad economic decision, despite the rule being brought in under a previous PS government. On the other hand, the huge gap in job security between the CDDs and CDIs is real; CDDs can only be extended a limited number of times. CDIs are certainly ironclad; there are only a few cases outside the review period where the employer can terminate the employment, which according to neoclassical thinking would make firms reluctant to hirer workers on these contracts; nevertheless, they represent permanent employment in France. Finally, it has been argued that the 50th worker-rule has limited the growth of French companies, who don’t want to deal with the potential growth of workers’ councils in their firm; trade unions are particularly powerful in France. What specifically links all these issues is the fact that President Hollande has not only opted for other solutions to the French economic travails, but he has ruled out touching any of these issues. The FT argued, whilst trying to circumvent existing laws as the President has done (the so-called Combrexelle Reforms), he needs to also implement other major reforms. The article from last week ended with “he will have to be bolder”.
Ultimately, a pro-market newspaper like the FT will always argue for the liberalisation of markets and the removal of restrictive regulation, no matter the circumstances. A particular bone that free-marketeers like to pick is a market weighted in the workers’ favour. However, we must be clear that most French people are struggling under the current system, rather than benefiting from it; the CDD contracts keep people out of permanent employment and the restrictiveness of the CDI means that employers will not hirer people in times of boom, for fear of not being able to cut costs in times of bust. The French expect a move on the economy front, and being unable to affect change here will ultimately lead to a bleeding of voters to the right, in the form of Les Républicains (LR) and FN. Seeing as a more flexible labour market is the lesser of 2 evils, I think the President really needs to step up on this front; the market needs to be regulated carefully, and state-control doesn’t necessarily lead to a better situation for workers overall. If he doesn’t act soon, not only will France sink deeper into the quagmire of irrelevance on the European stage, and this leave even more of the field to a far more neoliberal Germany, but moderate parties like PS will lose out to the FN, something that cannot be allowed to happen.
Sources: POLITICO, FT, AFP, France 24
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