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Zooming In On The French Labor Market

Zooming In On The French Labor Market
 Franck Morel
Senior Fellow - Workforce and Employment Law

Between 2016 and 2021, France’s employment notably improved, with a decline in the unemployment rate from 10.0% to 7.4%. Despite this improvement, France remains above unemployment rates average among European countries. Emmanuel Macron’s rapid implementation of employment reforms (unemployment insurance, collective bargaining) was undermined by the Covid-19 crisis. Nevertheless, the tools for improved employment have been put in place in accordance with the government’s initial commitments. It is now up to companies, in particular VSEs and SMEs, to take advantage of reforms, and transition towards a more sustainable labor market.

This article is part of a series that looks into the achievements and drawbacks of Emmanuel Macron’s presidential term. The extended analysis in French can be found here

Key Notions: 

  • Liberalization of the labor market - Emmanuel Macron made reforming labor law the keystone of the government’s legislative programme. By liberalizing the labor market, he promised to increase employment flexibility, lower labor costs, and make labor litigation more feasible. 
  • Labor equality index (L’index de l’égalité professionnelle) - In place since 2019, this index was designed with the aim of putting an end to professional inequalities. This requires all companies with at least 50 employees to calculate and publish an index of professional equality between women and men. 
  • Unemployment benefits reforms - The French government began implementing reforms to unemployment benefits in July 2021, with the aim to increase incentives for the job-seekers to obtain and stay in employment rather than to extend living off of benefits only. This includes encouraging businesses to provide more long-term contracts and to inhibit an excessive use of more precarious short-term contracts. 
  • Small and Medium Sized Enterprises - Micro-enterprises are a key indicator of the government’s labor market strategy, and were a priority under Emmanuel Macron’s "special plan" to mitigate the effects of France’s lockdown on unemployment. 
  • UNEDIC (National Professional Union for Employment in Industry and Trade) - Ensures the management of the French Unemployment insurance system. 
  • SMIC - The interprofessional minimum wage, which was the subject of intense discussion during France’s Yellow West movement.
  • Digital Labor Code - In January 2020, during France’s lockdown, Emmanuel Macron’s government promised "free access to a clear, accessible and understandable digital labor code" in response to the concerns raised by the leaders of VSE/SMEs and employees. 

Key Figures:

  • During the first quarter of 2018, over 1.4 million people between the ages of 25 and 49 years were unemployed in France, representing a youth unemployment rate of about 20.68% that year. Unemployment remains a rampant issue for the French economy, being stagnant year-over-year since the financial and economical crisis in 2008.
  • Over 2021, the number of unemployed people in France fell by 12.6%. During the fourth quarter specifically, unemployment fell by 5.9%, to a total of 3.336 million people. 
  • With Emmanuel Macron’s unemployment benefits reforms, businesses which resort to short-term contracts more than the industry average will see unemployment insurance contributions rise by up to 1 percentage point of their payroll, while those offering more long-term contracts will have to contribute less. This will apply to 21,000 businesses of 11 or more employees
  • In accordance with the government’s labor law reforms, a social assistance program has been established for unemployed young people which will offer them a monthly allowance of 500 euros (US$579) linked to training. The program will be open to all jobless people under 26 years old from March 1, 2022 as part of a new scheme to boost youth employment.
  • To respond to the Covid-19 crisis, the government has structurally modified its ‘partial activity’ scheme, which prevents economic layoffs and makes it possible to strengthen employment even when businesses are facing short-term economic difficulties. According to an estimate by Dares, 3 billion hours have been compensated for since March 2020, with €31.5 billion in allowances paid. 

Evaluating the job market in France: 

  • From 2016 to 2019, France’s employment rate for 15 to 64 year olds increased from 64.2% to 65.6% according to the National Institute of Statistics and Economic Studies (INSEE). Bearing in mind that Emmanuel Macron assumed office in May 2017, the unemployment rate decreased from 10.0% to 8.1% between 2016 and 2019. Despite these improvements, France remains in the second-lowest quartile of unemployment rates among EU countries.
  • In the wake of labor market liberalization (initiated in France around 10 years ago) Emmanuel Macron has expressed his ambitions to advance social dialogue and reform the unemployment insurance system.
  • These reforms, which were rapidly formulated by the government, have occurred simultaneously to the Covid-19 health crisis. The implementation of unemployment insurance reforms has therefore either been postponed, or the intended results have been undermined due to the socio-economic impact of the global pandemic. Nevertheless, the tools for reform have been established in accordance with Emmanuel Macron’s initial plan. It is now the responsibility of businesses, particularly small ones (VSEs and SMEs), to take advantage of the reforms, and contribute to improving the employment rate. 
  • UNEDIC, the French government agency in charge of unemployment insurance, estimates that 2.8 million people in France will be entitled to unemployment benefits between July 2021 and June 2022. According to the organization, these figures will lead to an average reduction of 17% in the daily allowances of 1.15M recipients (i.e. 41%). 
  • With regards to evaluating and implementing unemployment insurance reforms, there are two main challenges: the low rate of resignations and self-employed workers in France, and the inability to convince social partners to adhere to the new plan that came into effect in the fall of 2021. 
  • In sum, the success of Emmanuel Macron’s employment policies has derived from less obvious projects:
  1. The implementation of the professional equality index, despite initial criticisms among the corporate sector, has proved to be an effective structuring tool that companies have quickly adopted.
  2. The emergency measures established during the Covid-19 crisis have played a fundamental role in renewing economic activity. This has been a central tool for preserving employment, and enabling social partners, with encouragement by the Government, to reach an agreement on remote working and employment support. Despite a mixed record, these measures have led to significant job creation.
  • To address the consequences of the Covid-19 crisis on youth employment and training, the Government has set up a €9 billion plan for young people: the "1 young person, 1 solution" scheme. This mobilizes several measures to provide financial assistance for the recruitment of young people under 26, including hiring aid, training, support, financial aid for young people in difficulty, etc.
  • In the future, ownership by small and medium-sized businesses of collective bargaining tools, and the ability to further relax the rules on working hours and employment contracts, will be key indicators of the success, or failures, of Emmanuel Macron’s job market strategy. 
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