France: planned labour market reform goes in the right direction but is not enough

No bin collections, train cancellations and long queues at petrol stations – for weeks France has been suffering the consequences of the strike organised by the trade unions in protest against the planned labour market reform. The French government wants to use measures including the relaxation of employees’ protection against dismissal and more flexible working hours to bring momentum into the labour market and increase employment. The current reform is not the first attempt to stimulate the country’s labour market.

Statistics indicate that there is an urgent need for action. The rate of unemployment in France has persistently been close to the 10% mark for many years. Worst affected are young people, starting their careers. Youth unemployment in the country is almost 24%. In 2015, only around 13% of new contracts of employment were permanent. All others were fixed-term contracts of employment and many with a term of less than one month.

With the reform, which goes in the right direction, the government wants to get a grip on the problems. Its plans are aimed at making French labour market regulations more flexible. Essentially, the regulations concerning compliance with the 35-hour week are to be made more flexible without actually abolishing them. Agreements on working hours and overtime pay are to be simplified at company level in the future. This would reduce the influence of trade unions, because company agreements would then take precedence over sectoral collective agreements. In addition, greater flexibility is to be introduced with regard to dismissal, and redundancy payment is to be limited.

The massive protest against the labour market reform has already resulted in the planned reform being watered down. Nevertheless, there now seems to be a deadlock between the trade unions and the government. Both sides could lose face. The trade unions are fighting the bill to prevent a restriction of their influence. For Hollande’s government, giving in to the trade unions and a further weakening of the reform would be tantamount to political failure and an indication that reforms are virtually impossible in France.

Our assessment is that the proposed measures are not extensive enough, because important aspects are not even addressed with the planned reform. Problem areas, such as the long-established division of the workforce on the basis of fixed-term and permanent contracts of employment, a comparatively high minimum wage and generous unemployment benefits, remain unaffected by the reform. The bill simply does not go far enough for a comprehensive reform.

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