France: Protests failing to undermine the appetite for reform

One thing that really can be said of France’s President Emmanuel Macron: he is not allowing the street protests to deter him from implementing the announced reforms. With the popularity of the so-called yellow vests increasingly waning, he now faces the risk of disputes with the trade unions. Following the labour market reform introduced in 2017 with simplified dismissal and hiring rules, employers and trade unions were recently presented with details of the planned reform of the unemployment insurance system.

The key points of the reform include longer periods of employment before unemployment insurance benefits can be granted and a capping of benefits for higher earners. Previously, unemployment insurance could be claimed if within a period of 28 months applicants had worked in at least 4 of those months. From now on, applicants must have been in employment for at least 6 months. Moreover, in future benefits will be made increasingly dependent on previous income levels, the aim being to prevent low-income earners from improving their situation through unemployment. On average, beneficiaries will receive approx. 1,020 euros per month. For higher earners from 4,500 euros per month, 30 percent of their entitlements will soon be reduced from the seventh reference month onwards.

To make open-end employment contracts more attractive, a bonus/malus system is also to be introduced, albeit only in some sectors at first. The aim is to encourage companies to award more longer-term employment contracts. The more employees a company makes redundant, the more the company’s contributions to unemployment insurance should increase.

With the reform that will probably be adopted as a decree without a prior parliamentary vote, the government aims on the one hand to generate savings of 3.4 billion euros in unemployment insurance by 2022 and on the other hand to stimulate employment. After all, the deficit of the unemployment insurance fund has risen steadily in recent years, amounting to around 35 billion euros by the end of 2018.

For employers and trade unions which are jointly responsible for managing the unemployment insurance system, the reform comes as a slap in the face. Negotiations on the reform of the unemployment insurance system between the government on the one hand and employers and trade unions on the other failed to find common ground in February of this year. Macron has therefore now decided to go it alone.

Protests can be expected – as is usual in France. The trade unions are against the social cutbacks. For the employers, the new reform complicates things further and signals by implication higher taxation. They do not expect employment to rise as a result.

Although unemployment insurance remains relatively generous by international standards, despite the reform that will come into force in 2020, the signal that the Macron government wants to send out is that it has no intention of allowing resistance to scupper the announced socio-political reform course. We can only hope that it remains at that.

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