May 04, 2016

France debates labor reforms

The French parliament began to debate controversial reforms to the country’s strict labor laws this week, following almost two months of protests.

The reforms, introduced by president François Hollande, would remove some of the employment protections French workers have against being laid off, in an attempt to encourage businesses to hire more staff.

They would also remove the current restriction on employees working over 35 hours a week, and give employers more power to cut working hours and wages.

The Hollande reforms are intended to address the unemployment rate in France, which currently stands at 10.2%, increasing to 24% among young people.

However, some critics—including the economist Thomas Piketty—argue that it is austerity measures, rather than labor laws, that are to blame for France’s slow economic recovery.

The reforms have prompted a series of widespread and sometimes violent protests, most recently during a May Day parade in Paris arranged to coincide with International Workers’ Day.

Stefano Scarpetta of the OECD has written for IZA World of Labor about employment protection. He argues that policymakers need to find the right balance between protecting workers and promoting efficient resource allocation and productivity growth, and writes: “Employment protection reform should be part of a comprehensive package that promotes better allocation of labor and adaptability in the labor market but also provides safety nets for the unemployed and effective re-employment services.”

Elsewhere, Torben M. Andersen has written for us about the Danish-style “flexicurity” model—which combines flexible hiring and firing rules with income security for workers—and how successful it is during periods of economic downturn. Noting that long-term unemployment did not increase in Denmark during the great recession, he writes: “What seems to account for the success of the model are Denmark’s active labor market policies and having the fiscal space to accommodate the crisis.”

Related articles:
Employment protection by Stefano Scarpetta
A flexicurity labor market during recession by Torben M. Andersen
Employment effects of longer working hours by Thorsten Schank
Find more IZA World of Labor articles on labor market regulation