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France's Travails

“We have tried everything against unemployment” -- Francois Mitterrand, 1992. 

By Sémhur - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=7262370

By Sémhur - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=7262370

Unemployment at its worst in the last U.S. recession was roughly the norm for France in the past two decades. American lawmakers repeatedly controverted whether to extend unemployment benefits, weighing the needs of the unemployed against the possible perverse effects of lessening job search. In France, the problem is such that the government sometimes provides fake jobs to keep up morale among the unemployed.

France has a two-tier labor market, in which insiders with 'indefinite' contracts are secure, those outside are not. The whole market enjoys long and generous unemployment benefits, but these wear thin if one is never able to break into a more permanent job.

The trouble is that it is almost impossible to fire someone from a 'normal' contract in France. The firm must show a tribunal that it will go bankrupt if it does not let the worker go (there are also provisions relating to technical change).  Perhaps predictably, almost all the new hires in any given year (87% of them in 2015) are short-term, temporary contracts that, if they let some younger workers get by, certainly do not make a good foundation for a future.

This spring the controverted “Loi El-Khomri” was pushed to the Senate over the objections of the lower house. Its proposes, along with reducing overtime pay, to make it easier to fire workers under 26 and reduce assessments against employers for separation. Both of these ought to make it easier for firms to bring in young labor-market outsiders into long-term employment, without tampering with the strong protections for older workers.  While outside commentators typically regarded the bill as a fairly mild step towards a flexible labor market, the law nearly brought down Vall's cabinet, and prompted months of strikes and violent protests.

This follows a similarly fraught but rather tepid reform, the Loi Macron, suggested by the last Labor Minister.  

"Article 80 of the loi Macron, which would authorise employees to work on 12 Sundays per year, instead of the current 5, is the most controversial part of the bill. Some see it as a minor modification, while for others it constitutes a breach of the French social system. The left wing of the Socialist Party wanted to secure greater compensation for Sunday workers, beyond the double pay required under French law."

If working more Sundays is a breach of the social contract, one wonders what to say about high and persistent unemployment for the young. No one contests that such protections for workers are good for those workers. But it is difficult to read such protections as good, if you do not enjoy them yourself.  About a third of workers under 26 are on temporary contracts, on the outside of these protections. These young outsiders do not find it easy to break in: “[i]n France only a fifth of temps are in permanent jobs three years later, compared with almost half in Britain.” Since it is nearly impossible to get rid of a bad employee (the labor code is 3,800 pages and growing), firms must be very careful in choosing to hire anyone in the first place.

This sort of protection pits the currently employed against those who are not, and indeed against future generations of workers. The question facing the French is not whether to give workers protection, but whether they can stomach protecting some at the cost of the rest.

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