Macron Labor Reforms Bring Hope to Businesses

Protests defeated Francois Hollande when he tried to shake up France’s jobs market. Jacques Chirac backed down when his public sector reforms met fierce resistance on the streets. Nicolas Sarkozy faced down prolonged strikes in his battle to raise the retirement age, only for his successor to chop it back down to 60. Now it is Emmanuel Macron’s turn.

Amending France's highly complex labor laws—created to protect the individual worker—was a central plank of Macron's political platform, news outlets reported.

The 39-year-old centrist sees overhauling France's rigid labor regulations as key to tackling the unemployment rate which is now 9.5%—roughly twice the level of Britain or Germany.

In an interview with Le Point magazine this week, he said that the labor reform was a "deep and ambitious transformation" in order to "release energies" and put the country back on a growth track.

"We must see things as they are", Macron was quoted as saying. "We are the only large economy of the European Union that has not overcome mass unemployment for more than three decades." Indeed, France's youth unemployment rate is almost double the OECD average.

The cost of firing workers will be capped. Unions will no longer set pay for entire industries—employers will negotiate on a company level instead. Workers’ committees, which are mandatory in big firms, will be cut down. But it is not all one-way traffic. Minimum payouts to redundant workers are going up, too.

Overhauling Sclerotic Jobs Market

French businesses have reacted with joy to Macron’s labor reforms amid hopes the overhaul of the country’s sclerotic jobs market will boost employment and the economy.  

The communist-backed CGT union predictably called for a day of protests on September 12, describing the changes to the labor code a “declaration of war”.

But other unions, including the leftist Force Ouvriere, which fiercely opposed a previous, less radical reform, were far more conciliatory.   

Opinion polls were mixed, with one suggesting a small majority of French approved the changes, while another suggested a larger majority opposed it.  

Employers, however, have expressed delight—a rare occurrence in a country whose bosses and politicians have often been at loggerheads.

Alain Griset, head of U2P, which represents small business owners, said: “This is the first time that a labor reform contains such important measures that meet the needs of French businesses and are adapted to their size. In the past, it was one size fits all.”  

In one key change, companies employing fewer than 50 workers—95% of all French companies—will be able to negotiate deals directly with employees on working hours, pay and overtime.   

In another, damages awarded by courts for unfair dismissals will now be capped, and employers’ arguments will no longer be able to be thrown out by labor courts on a procedural technicality.  

Fewer Complications

Alain Humann, 59, who runs a Paris-based events company with 25 employees, Human ’n Partners, said the reform brought bosses “peace of mind” and fewer “complications”.  

“Greater flexibility means employers can take on new teams with fewer worries if they need to downsize due to a drop in activity. On the other hand those who will more easily lose their jobs will be trained up and find a job more easily, so it’s well-balanced.”  

The plan would also give companies more flexibility to adapt pay and working hours to market conditions.

Humann doubted the reform would lead to huge strikes and blockages. “The unions had three months to negotiate. The French are unmanageable, but they need to realize they can’t block the country every ten minutes.”  

But economists have warned that the reform alone would not be enough to boost growth, and that changes to unemployment insurance and professional training would also be necessary to reduce unemployment, currently at more than 9%, AP said.

“Nobody today can seriously say that our ... labor law favors recruitment,” Prime Minister Edouard Philippe said in unveiling the five measures on Thursday. “The labor law as it is in our country is often perceived as an obstacle to recruiting, an obstacle to investment.” Still, Philippe conceded the government was treading on risky territory politically.

Labor Minister Muriel Penicaud said the reforms aim to not just change France’s work rules but “to change the behavior of social dialogue in our country.”