France has seen another rise in unemployment in August, with the number of fully unemployed people (called Category A job-seekers) going up by 34,900 to reach a tally of 3,518,100. This is a 1% increase over the last month, and a 0.1% increase over the last year from August 2016. While there has been an improvement in business and consumer confidence, this upswing has not yet translated into more jobs in the market. The unemployment rate in France is tracked very closely, which, at 9.6% is above the European average, and more than double of Germany’s.
President Emmanuel Macron, the youngest leader of France since Bonaparte, took office in May of this year. Resolving the unemployment issue was one of his major campaign promises.
Currently, labor laws are very strict, running into more than 3,000 pages, covering everything from wage negotiations up to what the ventilation system in a work environment should be like. According to Pierre Gattaz, 1 million jobs could be created if payroll taxes were reduced, and financial and legal risks of layoffs were lessened.
Some labor unions, on the other hand, feel that loosening regulations, making it easier to lay off people won’t improve the job market. The unions argue that the high unemployment rates are due to the high austerity measures imposed by the European Union to combat the 2008 recession. However, this argument falls a little short, as France has the least austere measures in the Union, and also the highest level of employment protection in Europe.
Economists feel that a more moderate stance needs to be taken. With France having one of the strictest labor laws in Europe, loosening even a few of the reforms could make the French companies a lot more competitive, and would open up more jobs in the market. However, identifying the correct labor laws to reform is critical in ensuring that such reforms would have a positive effect on the economy.
Macron plans to focus on three areas to reform:
- Companies should be allowed more freedom in deciding contractual issues such as compensation as well as working hours.
- In France, as a company grows, the number of Workers’ Councils also grow. Which is why a lot of French companies try to employ not more than 49 people – so that they deal with only one Workers’ Council. Merging the multiple Workers’ Councils would lessen the stress of unionism and increase company productivity.
- And the big one – limiting severance packages that are court imposed. This is one of the main reasons cited by companies for their reluctance in hiring more staff. The legal and financial hassle of layoffs.
The 35-hour week is not up for discussion though.
The controversy continue with HOW President Macron plans to implement these reforms. Instead of taking the traditional route of vote by parliament, he and his labor minister, Muriel Penicaud (former HR head of French giant Danone) met with business and union leaders to test what would be acceptable. Next, Macron’s cabinet has asked the French parliament to give his government the power to change the labor laws by decree. Resistance is expected to be minimal as Macron’s party has an overwhelming majority in parliament, and the law is expected to be passed by September this year.
Labor Unions in France are split over this step in labor reforms. The CGT, France’s second largest worker’s union, has called for a strike on September 12 to protest. However, the CFDT, France’s largest union, has decided to wait and see details of the reforms in September before deciding on any action.