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April 20, 2017

Labor market issues in the 2017 French presidential election

Opinion image

High unemployment in France is one of the main issues of the presidential election of May 2017. Today, the unemployment rate is 10%; and it has averaged 9.5% over the last 30 years. In 2016, the government tried to pass reforms to reduce job protection and to decentralize collective bargaining in order to foster job creation. However, the strong opposition of trade unions, which organized many demonstrations and strikes, led the government to limit the ambition of the reforms, which rendered them ineffective at reducing unemployment. 

In this depressing context, populist proposals flourish. The main extreme-right candidate, Marine Le Pen, who is leading in the polls, proposes to stop immigration, limit imports, tax the recruitment of foreigners, raise public expenditures, increase the minimum wage, and lower the legal retirement age to 60 instead of the current 62. The program of the main extreme-left candidate (Jean-Luc Mélanchon) is quite similar concerning labor market issues, except for immigration. The official candidate of the Socialist Party (Benoît Hamon), advised by Thomas Piketty, stresses that unemployment is the consequence of technological progress which causes the end of work. Consequently, he proposes to reduce the legal weekly working time to 32 hours from 35 today, in order to share the fewer and fewer surviving jobs. For those who do not want, or cannot, work, a new generous basic universal income will be available. His program also includes increases in public expenditures, coordinated at the European level, thanks to the expected cooperation of Germany, which will supposedly agree to mutualize the public debt of European countries when they exceed a threshold of 60% of their GDP. 

Fortunately, it seems that some French voters are aware that the end of work does not seem to be a prominent threat in neighboring countries nowadays. In Germany, unemployment dropped from 11% in 2005 to 3.8% today. In the UK, unemployment reached 8% after the Great Recession and is now at 4.7%. There is a strong consensus among labor economists that structural reforms significantly contributed to the improvement of labor markets in both countries. Two candidates, from the center (Emmanuel Macron) and from the right (François Fillon), have offered proposals that would make these structural reforms. Both candidates want to decentralize collective bargaining to the firm level and reduce employers’ social contribution on low-wage workers. Fillon wants to eliminate any reference to legal working time in order to get rid of the 35 hours, whereas Macron prefers to rely on the decentralization or collective bargaining to circumvent the 35-hour limitation. Both candidates aim to reform unemployment insurance and employment protection to introduce flexisecurity—a proactive labor market policy. Concerning unemployment insurance, Fillon proposes cutting unemployment benefits, whereas Macron wants to maintain the generosity of the current system and extend it to self-employed workers; but, in contrast, Macron promises to raise the intensity of monitoring and sanctions on recipients. Both candidates have plans to reform the vocational training system, which is very badly managed jointly by business and labor unions. Concerning employment protection, the two candidates want to reduce the costs of dismissing workers on open-ended contracts. 

All in all, these two candidates’ proposals make sense toward the goal of improving job creation. Nevertheless, it is not sure that either candidate would be able, if elected, to implement them on a sufficient scale to improve significantly the performance of the labor market, especially when one considers the likely extent of trade union opposition.

© Pierre Cahuc

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