France resigned to flexible labour laws
The jobless rate rose to 10.6 per cent in the December quarter, up 0.4 percentage points, the statistics agency INSEE said, as gross domestic product shrank 0.3 per cent amid government austerity measures. Almost 26 per cent of young people were classified as jobless, INSEE said.
The answer, the government hopes, lies in a "flexicurity" agreement signed on January 11 by employers and unions that would give companies more freedom to hire and fire. On Wednesday, Prime Minister Jean-Marc Ayrault's cabinet endorsed the deal and said it would present it to parliament for approval this autumn.
"This is a win-win deal for businesses that get into trouble, that have to reorganise," Mr Ayrault said, adding that the accord gives companies a tool other than lay-offs for addressing their problems.
The agreement, which draws on ideas pioneered in Denmark, would probably not have been possible a generation ago.
But several years of crisis and economic stagnation have led to an acknowledgement across most of the political spectrum that relatively high labour costs are making it harder for French workers to compete when jobs can easily be outsourced to low-wage countries.
The January 11 proposal would allow companies facing problems to negotiate with unions to cut working hours and wages for up to two years, reducing the incentive to lay-off employees. It would also make it easier for employees to be reassigned and would cap the amount that laid-off workers could be awarded by labour courts.
In exchange, employers would have to pay more of the healthcare costs for about 3.5 million lower-wage workers. Companies would be discouraged from short-term hiring by a payroll tax surcharge, graduated downward as the term of contracts increased. Workers would gain seats on the boards of major enterprises. And those who were laid off would not lose their accumulated unemployment benefits as soon as they returned to work.
Frequently Asked Questions about this Article…
France's jobless rate rose to 10.6% in the December quarter — its highest level since 1999 — while GDP shrank 0.3%. Everyday investors should watch unemployment and GDP because high joblessness and economic contraction can weigh on consumer demand, corporate profits and the investment climate in France and Europe.
The 'flexicurity' proposal, agreed by employers and unions on January 11 and backed by the cabinet, would give companies more flexibility to hire and fire while including worker protections. Key measures include negotiated temporary cuts to hours and wages, easier reassignment of employees, limits on labour-court awards and new worker representation on corporate boards.
Under the proposal, companies in difficulty could negotiate with unions to cut hours and wages for up to two years instead of laying off staff, and would have a tool other than mass redundancies for reorganising. The deal also caps the amounts that laid-off workers could be awarded by labour courts, aiming to reduce the incentive to use layoffs as the first option.
Employers would face higher costs in some areas: they would pay more of the healthcare costs for about 3.5 million lower‑wage workers and face a payroll tax surcharge to discourage short‑term hiring. That surcharge would be graduated downward as contract terms lengthen.
Workers would gain several protections: easier reassignment to other roles, preservation of accumulated unemployment benefits when they return to work, and seats on the boards of major companies. These measures aim to balance increased employer flexibility with improved worker security.
The reforms aim to address high labour costs that have made it harder for French workers to compete, especially when jobs can be outsourced to low‑wage countries. By allowing temporary adjustments to hours and wages and reducing layoff incentives, the government hopes to make companies more competitive and limit outsourcing pressure.
The cabinet endorsed the agreement and said it would present the proposal to parliament for approval in the autumn. Until parliament approves and the measures are implemented, the changes remain proposals rather than law.
Key signals include the official unemployment rate (especially youth unemployment at about 26%), GDP growth or contraction, parliamentary approval and implementation of the reforms, corporate hiring patterns versus short‑term contracts, and reported changes in layoffs or company reorganisations. Monitoring these indicators can show whether the reforms are translating into stronger hiring and economic recovery.
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