The newly elected French president is attempting a feat that the newly elected American president wouldn’t dare: leadership.
Emmanuel Macron, the youngest French head of state since Napoleon, has stolen many American hearts thanks to his moving defense of the Paris climate accord, gutsy news conference with Vladimir Putin and, of course, the fact that he married a much older woman.
But here in France, his primary public contribution is expected to be on a different front: the economy.
For decades, France has struggled with stagnant labor markets and intractably high unemployment. The jobless rate stands at 9.6 percent, which – believe it or not – is a five-year low.
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Also for decades, French politicians have tried to reform the system. Macron’s predecessor, François Hollande, suffered record low approval ratings, partly due to the violent strikes and chaos that erupted when he worked to reform labor laws last year.
Rather than shying away from this hot-button issue – which Macron had overseen as Hollande’s economy minister – Macron made it a centerpiece of his presidential campaign. And after this Sunday’s first-round parliamentary elections, which his brand-new political party is projected to win in a landslide, his government will likely claim a public mandate to finally fix the system.
So what exactly is wrong with the job market in France?
The problem isn’t generous health care benefits or onerous environmental protections or the usual “job-killing” regulations that American politicians so often vilify – and that the French love.
It’s that it’s virtually impossible, or at the very least prohibitively expensive, to fire employees. Which makes hiring employees unattractive, too.
In France, firings and layoffs can generally happen under very limited circumstances, including gross negligence and “economic reasons.” Laid-off employees can challenge their dismissals in court, where judges are seen as somewhat hostile to employers.
Judges have wide latitude in deciding what counts as a justifiable “economic reason” for a layoff. They may decide that multinational firms that are losing money in France are not allowed to pare back their French workforce if they are collectively profitable in other countries, according to Jean-Charles Simon, an economist and former manager of the country’s main employer organization, Mouvement des Entreprises de France.
A layoff in such a case could be deemed unfair. Furthermore, there is no cap on the damages that judges can award for unfair dismissal, meaning employers’ potential risks are essentially limitless. The whole process can take years to resolve, too.
Unsurprisingly, employers turn whenever possible to temporary, short-term contract workers, who enjoy fewer protections. This has led to a two-tier labor market with ironclad job security for some and virtually none for the rest.
In fact, about two-thirds of job contracts signed each year are fixed-term arrangements lasting less than a month, according to Francis Kramarz, director of CREST (the Center for Research in Economics and Statistics) and professor at École Polytechnique and ENSAE. Young workers often find themselves doomed to an endless series of short-term gigs, with no opportunities for upward mobility.
In addition to job protections, other rigid policies have made France a difficult place to run a business, particularly for smaller firms.
Only about 8 percent of French workers belong to unions, but thanks to French labor law, 98 percent of workers are covered by national, industry-wide union-negotiated contracts. These can set generous and inflexible pay scales, overtime rates and severance packages, regardless of firm size, resources or whether any of its employees belong to a union.
Arguably this is one reason larger firms have not pushed harder for market reforms. They know how to work the system, have lawyers on staff and can absorb many of the steep costs that smaller firms cannot.
“This is a system for insiders, and insiders collude to keep it in place,” complains Pierre Cahuc, an economics professor at CREST and École Polytechnique, said.
Nor are trade unions terribly keen on revamping the broken system, because they fear that their hard-won worker protections will disappear.
Macron has framed his agenda – which includes making it easier to ax workers, capping damages in unfair-dismissal cases and decentralizing collective bargaining – as both pro-business and pro-worker, given that it would grant additional opportunities to job-seekers. In some ways he plans to expand worker protections by making entrepreneurs and those who voluntarily quit their jobs newly eligible for unemployment benefits. The goal would be to encourage risk-taking.
Macron plans to transform labor laws by summer’s end. That certainly seems ambitious, given that the unions that organized last year’s tumultuous strikes and protests have threatened a repeat performance.
Nonetheless, it’s hard not to admire, and perhaps even envy, Macron’s political impulses here. In the face of divisive economic challenges, he is choosing not to pander and scapegoat but to restructure and reinvent.
The Washington Post