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France Unveils Contentious Labor Overhaul in Big Test for Macron France Unveils Contentious Labor Overhaul in Big Test for Macron
(about 7 hours later)
PARIS — The French government announced on Thursday a plan to overhaul the labor code, a highly awaited and contentious effort to loosen regulations and stimulate the economy that has been met with opposition from unions and left-wing parties who say the changes go too far in repealing workers’ rights. PARIS — After 30 years of fraught attempts to make France’s labor market more flexible, the government announced sweeping changes on Thursday with the potential to radically shift the balance of power from workers to employers.
The labor overhaul was one of Emmanuel Macron’s major promises during his campaign, and it represents one of the first big tests of his pledge as president to reshape France’s social and economic landscape and was being closely watched by the country’s European partners and by investors abroad. The step was the first of several that President Emmanuel Macron and his government believe will galvanize the French economy. It was cheered in European capitals, where an invigorated France is considered critical to the survival of a European Union that is finally showing signs of revival after a lost decade.
Mr. Macron, who has slipped significantly in the polls over the summer, is trying to avoid the intense backlash that led to street protests when his predecessor, François Hollande, introduced changes to a system that employers have long complained makes it difficult for them to compete globally. The changes to France’s labor law, the infamous Code du Travail, has proved contentious for Mr. Macron. The young president toppled the old political order with his election just three months ago and his popularity has already slumped in part because of the uncertainly surrounding his labor reform effort.
The outlines of the labor overhaul were already known, and some measures were widely expected. Broadly speaking, the rules would: Economists in France and across Europe expressed optimism about the new law, however, suggesting that Mr. Macron had seized the moment just after his election, when the country might be more receptive to what was being characterized as a revolutionary change.
• Make it easier for employers to hire and fire workers; France has stagnated for years under chronically elevated unemployment and slow growth. The country’s strong worker protections and expensive benefits have been blamed by some for being at least partly at the root of the problem.
• Allow employers in some instances to engage in collective bargaining at the company level, instead of conforming to industrywide agreements; Mr. Macron’s changes make it easier to hire and fire workers and allow some workplace issues to be negotiated at the company level, rather than with national unions, in hopes of stimulating both growth and job creation. The government focused especially on smaller businesses with fewer than 50 employees — the majority of French businesses — which have complained bitterly about excessive red tape and regulations.
• Simplify the relationship between employers and worker representatives. “This reform brings a radical change, a big bang in the functioning of the French labor market,” said Gilbert Cette, an economist at the University of Aix-Marseille. “This is a new approach that turns the market upside down completely,” he said, referring to the decentralization of labor negotiations especially for smaller companies.
The government held talks over the summer with the unions to discuss the labor rules, but the exact details of the full plan, which will come into effect next month, were not made public until Thursday, when Prime Minister Édouard Philippe and the labor minister, Muriel Pénicaud, held a news conference in Paris, just hours after presenting the finalized measures to workers’ and employers’ unions. The step by France was also important to Europe, where far-right and populist forces have fed on economic stagnation as well as on the disruption caused by globalization. The new step by Mr. Macron tries to answer both those challenges, belatedly, on France’s own terms.
“Of course, we know that labor laws are not the primary cause of unemployment in France,” Mr. Philippe said. “But we also know that if we want to move forward on the question of employment, we have to deal with all aspects, all causes of unemployment together.” France had put off fundamental changes to revitalize its economy far longer than its European Union partners. Germany crossed that Rubicon in the 1990s under Chancellor Gerhard Schröder. More recently, painful changes were forced upon a host of other nations by the euro and debt crisis.
Mr. Philippe said that for employers, especially small companies, and for foreign investors, the labor code “is often perceived as an obstacle to hiring, as an obstacle to investment,” and he called the overhaul “ambitious, balanced, and fair.” “There’s no long term sustainability for the eurozone if France is not managing to reform structurally like for example what Spain did, what Portugal did a bit, what Ireland did,” said Karel Lannoo, the chief executive officer of the Center for European Policy Studies, a research organization in Brussels.
Pierre Gattaz, the head of Medef, the main employers’ organization, said at a news conference after the announcement that the overhaul was an “important first step in the construction of labor legislation that is in sync with the daily reality of our companies.” But, he added, he remained “vigilant” about how the changes would be applied. “If one of the core partners doesn’t reform or just piggybacks off Germany, then one day or another, the currency collapses,” Mr. Lannoo warned.
The changes to the vast and complicated labor code are only part of a broader effort, as the government is also working on more contentious changes, including budget cuts and modifications to the pension and unemployment systems. Others agreed.
The changes, among other things, would enable companies to bargain directly with workers in businesses with fewer than 20 employees, and merge different bodies that represent workers in a company into one unified group. Roughly 15 years ago, “France and Germany had economies that were more or less comparable, and that ceased to be the case because the Germans wisely did microreforms and the French did not,” said Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations.
Regular severance pay for workers would be increased, but the new rules put a cap on the payouts issued by labor courts when workers are wrongfully dismissed, and they would reduce the amount of time during which an employee can challenge a dismissal. So the French ended up with “high unemployment, which fed populism, and getting out of that trap is vital to a country where the ratio of public debt to GDP on current trends would eventually turn France into Italy,” Mr. Mallaby said.
The new measures would also reduce the scope granted to labor courts to assess a company’s health when determining whether it had rightfully fired workers on economic grounds. Until now, the courts could assess the global situation of a company, but the new rules will limit the basis for any ruling to the company’s situation in France. That would make it easier for a company that operates in multiple countries to lay off French workers even if it is profitable elsewhere. A more economically sound France will have more influence with Berlin, and could help soften Germany’s “rather inflexible economic policy for the rest of the E.U.,” he added. In the last few years, “we could have done with more France and less Germany.”
“The reform of the labor market is a reform of profound transformation,” Mr. Macron told the weekly Le Point in a wide-ranging interview published online on Wednesday, adding that it had to be “ambitious and efficient enough to continue to lower mass unemployment.” But there is little doubt that for France the changes will bring both opportunity and risk.
The government argues that the changes are necessary to give companies more flexibility and to help businesses, especially smaller ones, adapt to an increasingly global marketplace. Mr. Philippe said that nine out of 10 companies in France had fewer than 50 employees. “We are entering into an economy built on innovation, skills, digitalization,” said Mr. Macron in an interview Thursday with the weekly newsmagazine Le Point.
But opponents on the left counter that hard-won worker rights are being unfairly watered down, and they dispute the notion that the changes would help create jobs. “To succeed in this world we need an economy that is much more flexible, much faster moving.”
Union leaders, speaking to reporters after the meeting with the government, expressed satisfaction with some points, like the fact that the role of industrywide agreements was weakened less than expected. But they voiced dismay at others, especially the greater leeway granted to smaller companies seeking to bypass unions in negotiating with workers. Employees will not have jobs for a lifetime, and unemployment will no longer be a catastrophic event in their lives, Rather it will be a risk that goes hand in hand with more frequent changes in profession, he said.
Philippe Martinez, the head of the General Confederation of Labor, known as the C.G.T., one of the more hard-line unions, said after the meeting that “all the fears that we had are confirmed,” while Jean-Claude Mailly, the head of the Force Ouvrière union, said that “all is not perfect, far from it.” Among the changes in the decrees published Thursday is license for employers to negotiate with workers over certain workplace issues rather than having to follow industrywide agreements. That will allow a car parts factory in one region to have a different agreement with its workers than a similar company elsewhere.
Mr. Macron vowed after his election in May to move swiftly on changes to the labor code, and he decided to proceed by issuing a list of decrees, which Parliament authorized the government to do this month. Small companies especially are being given more leeway to bargain directly with workers or their representatives, without the mediation of unions.
Mr. Philippe said that the five decrees presented on Thursday would be officially adopted during a cabinet meeting on Sept. 22 after consultations with a number of advisory bodies, and that any changes until then would only be “at the margins.” Not everyone saw the changes as positive.
The decrees will immediately go into effect after the president signs them and after they are officially published, but they will only become law if Parliament ratifies them in the coming months. If lawmakers reject the new labor measures, they will remain in effect, but with an inferior status that means they can be overturned by Parliament at a later date. “Macron has amplified something that has been in the air for a bit: to move labor negotiations closer to the ground,” said Michel Pigenet, a historian of work and social movements at the Sorbonne, one of France’s most prestigious universities.
Mr. Hollande successfully pushed for changes to loosen the French labor code last year, despite weeks of street protests that sometimes turned violent and that forced the government to dilute the overhaul. “But closer to the ground, it’s a fact that unions are weaker,” he said. “Thus the negotiation is certainly going to become less balanced.”
Opponents of the new changes are once again planning to demonstrate, but there are signs that their unity is fraying. The C.G.T. has called for nationwide protests on Sept. 12, while the left-wing France Unbowed party of former presidential candidate Jean-Luc Mélenchon is organizing a rally in Paris on Sept. 23. Unlike several French leaders before him, Mr. Macron was able to push through the changes so quickly because he had — controversially — circumvented parliamentary debate by persuading lawmakers to allow him to make the changes by decrees.
“Clearly, there is a confirmed assault on the labor code — with premeditation, on top of that,” Alexis Corbière, a France Unbowed parliamentary representative and top lieutenant of Mr. Mélenchon, said at a news conference on Thursday. Since his party had a majority in the National Assembly, the lower house of Parliament, and the opposition on both the left and right are divided among themselves, winning assent for the decrees was scarcely in doubt.
But other unions, including more moderate ones — and even Force Ouvrière, which stood by the C.G.T. last year to protest Mr. Hollande’s labor changes — have indicated that they will not demonstrate with the C.G.T., even though they are not entirely satisfied with the overhaul. The labor changes were then discussed with businesses and unions behind closed doors. They were unveiled Thursday and will go into effect after they are officially adopted at a cabinet meeting on Sept. 22, then signed by Mr. Macron and officially published.
Mr. Mailly said that his union still had to go over the fine print of the changes. “Sometimes, the devil is in the details,” he said. The decrees as also subject to ratification by Parliament in the in the coming months for them to become law, but that is hardly in doubt. .
Leaders of one major union, the General Confederation of Labor, or CGT, said that the changes were as bad as they expected, and that they would go ahead with a national strike on Sept. 12. Though the demonstration could be volatile, it is not expected to block the changes.
More moderate unions were more cautious, accepting some of the government’s compromises, but worrying about other provisions. Business groups struck a more optimistic note.
The relative equanimity came in large part because the Macron government went to great lengths to consult with everyone whose interests would be affected by the changes, holding more than 100 meetings since May to discuss the different provisions.
“We multiplied the meeting with the social partners and did not exclude anyone,” said Edouard Philippe, the prime minister, referring to both unions and employers, who were briefed on the final version just before the measure was detailed in a televised news conference.
Two larger unions, the CFDT and Force Ouvrière, have already announced although they were not completely satisfied with the changes, they would not take part in the Sept. 12th protest.
The decision by Force Ouvrière was significant because last year when President François Hollande tried to win approval for changes in France’s labor laws, its members took to the streets along with the most hard-line union, the CGT.
This year it is different, there was “real consultation” said Jean-Claude Mailly, Force Ouvrière’s leader.
“There were things we got, there were things we avoided and there are things we don’t agree with,” he said, adding that his union had to thoroughly study the changes.
The economist Gilbert Cette and others including, Agnés Bénassy-Queré, president of the semi-independent Council on Economic Analysis, which reports to the prime minister, warned that the impact would likely not be immediate.
She said that while there might be more job creation, it could be offset by more workers being fired in the near term. “The short-term impact is not completely clear,” she said.
“It will encourage hiring but also could free employers to fire,” she said. “It’s double-edged: The goal is to make the market more fluid.”
“Macron wants to break with the old system,” she said, adding that the fluidity would mean that while at first more people might experience periods of unemployment, the hope is that it will be short term.
France lags behind the rest of Europe in its ability to lessen its long-term unemployment, which hovers at about 4.2 percent, according to the Organization for Cooperation and Economic Development.
Overall unemployment is about 10 percent, but more than twice that for young people. In some areas of the country, especially the poorer suburbs of major cities, as many as 40 percent of youths are unemployed.
While some optimism surrounded the changes, the country still had more work to do, most economists agreed.
“We cannot wait for this reform to be the solution to France’s problems,” said Mr. Cette, noting that labor reforms cannot take three or four years to have the desired impact.
“It is one element along with tax reform, education and professional training that will have an effect,” he added, “but on its own, it’s not enough to bring us back to full employment.”