Monday 29 July 2019

Back to work......for some


The French Prime Minister’s policy statement to parliament some weeks ago was billed as the beginning of Act 2 of the Macron Presidency, hopefully heralding a return to the path of reform from which Emmanuel Macron was temporarily ejected by the five month-long protests of the “gilets jaunes” movement. The FT titled the next day: French Prime Minister seeks to get jobless back to work faster”, seeing the reform of unemployment benefits as the main takeaway from the speech. And indeed, a few days later, both the Prime Minister and his Minister of Labour, Muriel Pénicaud, officially presented the reform in detail.


Before delving into that detail, it’s worth pointing out that this is the second reform that the government has decided to remove from the time-honoured tradition of joint union employer/employee agreements, under which both side of industry are supposed to negotiate an agreement about how to manage vocational training or unemployment benefits or top-up pensions. When Macron became President, he made it clear that these three systems had to be profoundly shaken up, not only to make them more effective but also to reduce their respective deficits, which the state budget, in other words the taxpayer, ultimately ends up funding. Neither this injunction nor the fact that employee and employer unions draw some of their revenue from running these systems seems to have concentrated their minds. The first scheme to be taken over by the state was vocational training, now redesigned to be more responsive to the real needs of both industry and trainees. It is too early to tell whether a scheme run by public authorities will produce better results than one run by the “social partners” and if so, how long it will take to show. But initial indications are positive: it has been reported that new apprenticeship contracts for 2018-2019 for example have reached record levels even before the end of the school year.


The unemployment benefits scheme has followed suit. After months of negotiations from which no agreement emerged, the government has stepped in once again to take control. The detailed reform presented a few days ago is the result of its thinking. It is hardly a coincidence  in this context that Muriel Pénicaud herself, before coming to the attention of Emmanuel Macron and joining the French government as Minister of Labour, was for many years the top human resources manager of a large French company and has certainly a greater understanding of the corporate sector than most career politicians and their civil servants.


While most media, French and foreign, have focused mainly on the proposed curtailment of benefits for high-earning executives, an understandable if somewhat illogical approach given that it is executive staff and their employers who contribute most to the system,  the understated thrust of the announced changes seems to be to sharpen the incentives for the unemployed to find a new job rather than stay on benefits. As I wrote in a previous post (“Unemployment: really going down?” May 25th, 2019) a lot of the unemployed are able to claim unemployment benefit after working for only 4 months in the previous 28 and entitled to claim full benefits again after only 150 hours of employment. In addition, due to the way in which benefits are currently calculated, they can end up “earning” more in unemployment benefits than they did in salary! The government has therefore plumped for an overhaul of a system it considers, in comparison with those in many comparable countries, overgenerous.  Under the new system to be introduced at the beginning of next year, employees will have to have worked for 6 months out of the previous 24 to be able to claim benefits and will not be able to claim further benefits before they have been employed for at least 900 hours. Care will also be taken to ensure that henceforth, anyone receiving benefits will never receive more than in employment. As far as employers are concerned, they will be encouraged to offer fewer short and very short-term labour contracts by being penalised if they continue doing so but rewarded if they are prepared to make longer-term commitments to their employees.



The overall package is of course not perfect. The government has not for example given too much publicity to the fact that the “medico-social sector” is not covered by the new bonus /malus system. Hardly surprising when one considers that most hospitals and a lot of social care institutions are in the public sector and the government is hypocritically but understandably reluctant to prescribe its own remedies to itself! This being said, the new system has drawn protests in equal measure from both trade unions and employers, an indication that it probably represents a reasonable and common-sense compromise.  The state employment agency, “Pole Emploi”, is also to be given a greater role in helping the unemployed find work, a worthy idea but probably of little effect given that the agency now spends far more time managing benefits than filling job vacancies, advertisements for which have largely shifted to dedicated websites and small ads. The revamped system will be no miracle cure for unemployment either; experts consider that it may bring up to 250 000 unemployed back into work, under 10% of the almost 3 million people registered as unemployed, a clear indication that, contrary to what many people think and some politicians publicly state,  indolence is not the main cause of unemployment. But these provisos aside, the reform does seem a sensible step towards sharpening the incentives to work while imposing no extra hardship on those affected and supporting them more in their quest.  Emmanuel Macron, whose consistent and single-minded policy has always been to change the work culture in France by profoundly reforming the labour market would certainly warm to the FT’s headline that this further step along that road is indeed designed to get more people back into work faster.