The Economist: The French president acts on his promise to overhaul jobs laws

Emmanuel Macron’s labour reforms
The French president acts on his promise to overhaul jobs laws

Bold moves from the new leader
Europe
Aug 31st 2017
| PARIS

WHEN he launched his political movement last year, Emmanuel Macron said that he wanted to “unblock” France. Four months after he was elected president, his government on August 31st unveiled its first piece of legislation designed to do just that. It is a labour reform, consisting of 36 measures, which should help to loosen the labour code, encourage job creation and make it easier for firms to manage their headcount in France. “After decades of mass unemployment,” said Edouard Philippe, the prime minister, “nobody can seriously say that our labour law favours job creation.” The reforms, he said, would “make up for lost decades.”

The changes are wide-reaching and impressive, and rest on a number of guiding principles. One is that industrial relations must be devolved to the level of the firm. Employers will get more freedom to negotiate working time and salaries within their firm, rather than having to stick to branch-level agreements. France’s rate of unionisation in the private sector is surprisingly low; but the role of unions is powerfully entrenched by a complex tangle of rules governing their representation in companies. Now, the various statutory works councils—the delégués du personnel, the comité d’entreprise and the comité d’hygiène, de sécurité et des conditions de travail—are to be merged into one, which will simplify union discussions. Small firms without union representatives will have greater freedom to negotiate agreements, if they can secure the backing of a majority of employees.
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Another underlying idea is to encourage firms to create more permanent staff, by minimising the uncertainty that hangs over redundancy plans in France. Under current law, cases for unfair dismissal can be brought against a company for up to two years after an employee has left a firm, and the awards made by labour tribunals in such cases vary hugely, making it difficult for small companies to plan their budgets. Mr Macron’s reform reduces the cut-off to one year and caps such awards to 20 months of salary for an employee with 30 years of service, thus greatly reducing the element of financial risk. (In return, the level of mandatory redundancy pay will be increased.) The rules governing the right to make redundancies for firms in economic difficulty will also be eased.

A measure of how far all this touches some of the taboos about France’s eye-popping 3,500-page labour code was the reaction of certain union leaders. “All our worst fears have been confirmed,” declared Philippe Martinez, leader of the hard-line Confédération Générale du Travail (CGT). He had already called for a day of strikes on September 12th in protest. Even Laurent Berger, the leader of the more moderate Confédération Française Démocratique du Travail (CFDT), who has been a mostly constructive voice, called some of its measures “disappointing”. He added, though, that he would not back the strikes.

This is a crucial moment for Mr Macron. In many ways, he has managed this reform deftly so far. He spelt out during the election campaign what he wanted to do (and has been as good as his word), and said in advance that his reform would go through under an accelerated parliamentary procedure. His government has held some 100 meetings, involving 300 hours of talks, with unions over the past couple of months. So nobody can say that they have been taken by surprise. As a result, the new rules should be written into law by the end of September. That minimises the amount of time that unions and other opponents of the reforms now have to mobilise against them.

Still, over the summer Mr Macron’s approval ratings have slid precipitously. It will take time for the effects of the labour reform to feed into job creation. France’s unemployment rate is currently 9.8%—more than twice that in Germany—and has not dipped below 7% since 1983. Moreover, a worrying narrative is beginning to take hold in some quarters that the president, a former investment banker, is governing only for the bosses or the well-off. “Macron: president of the rich?” read the front cover of Libération, a left-leaning newspaper, last week. The government’s challenge will be to make the case that greater freedom for employers is not just about making it easier for bosses to shed staff, but about encouraging them to create jobs in the first place.
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