Reform without innovation: why the French labor reform is inconsistent with social progress

Mar 25, 2016
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The French labor reform has led to considerable controversies and serious opposition from labor unions and students. The draft bill, envisaging to help firms getting around easier the 35-hour work week, limiting severance payouts and reducing unions’ power to block company moves, has as an objective to safeguard and promote the competitiveness of businesses operating in France by giving them enhanced flexibility when hiring and dismissing workers.

However, the opposition to the reform, which was perceived by many opponents of the law as a social regression, has proved to be very strong, obliging the government to revise its version of the draft bill and to postpone its official adaptation in the council of ministers.

More generally, the executive paved the way for the debate to become highly explosive and to some extent biased. Its communication on the bill has been a disaster. From the leak of the draft legislation to the possibility envisaged to use the controversial article 49-3 of the Constitution to adopt legislation even without the necessary majority, it was hard to start off worse. Desolating as well are the political egos that transcend the law. Indeed, the government proved itself to be very aggressive on the communication of the bill and its key measures, due to the fact that prime minister Manuel Valls wanted to stand as the top social-democrat reformer of the government and not the minister of economy, Emmanuel Macron, who represents a serious political opponent in regard to Valls’ future political career, and was thus not allowed to push through the legislation himself as initially planned.

To this end, the draft bill was transferred to the new labor minister, Myriam El Khomri, easier to control for the prime minister. The petty wrangling of party politics largely influenced the biased debate around the law. In fact, by drafting the bill before consulting the social partners, the government wanted to demonstrate its determination to push the bill through the legislative process as fast as possible. It, however, neglected the highly explosive institution the French labor law “code du travail” represents.  As a result, in the new version the government was forced to revise, the bill no longer imposes a cap on severance pay for dismissed workers, a measure many companies argued would have abolished the variable costs of laying off employees. Instead, new limits are introduced as non-binding guidelines for labor courts. Likewise, the government finally renounced to grant employers of less than 50 workers the ability to take unilateral decisions without a company agreement applying to workers subjected to on-call duty or pre-assigned overtime remuneration.

Denouncing inequality in its core

If the student and labor unions that initiated large protests have in common the opposition to a law in contradiction with their vision of social labor rights, they find themselves however in very different positions on the job market. In reality, nothing could oppose labor unions and students more. Indeed, if the former want to protect their members from a more flexible long-term working contract (CDI), it is, nonetheless, possible to raise the question to why the latter are protesting against the bill and their motivation to do so. In fact, students who enter the job market have been increasingly exposed to precarious contracts, mostly short-term contracts, the so-called “CDD”.

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The injustice against youngsters in the access to the job market is flagrant. Nowadays, 90% of all employed workers in the job market get employed via a short-term contract, interim (replacement) or apprentissage (internship) and most of them are first-time job seekers. As a result, it became a routine for young people, if lucky enough to find a job in the first place, to go through several internships and short-term contracts before eventually getting hired on a long-term contract. Because even if short-term contracts are nowadays the principle for the new jobs created and are seen as an absolute necessity regarding the increasing need for flexibility in a fast evolving economic context, it is not so often stated that these contracts give absolutely no visibility and security to young people who often have great difficulties to get bank loans to have access to property and to build up their life and the private or professional projects going with it.

The access to the job market is thus divided into two categories: the workers employed on long-term contracts and the workers employed on short-term ones. The former are represented, even if not in a large part, regarding the weak unionization rate in France, by the unionists whereas the latter are not represented except by several student unions, mainly the UNEF, UNL and FIDL, that are not defending the right of the young people in the access to the job market but rather the same rights than the first, meaning long-term contract rights and thus contracts the new generation on the job market has rarely access to. The entire paradox of the protest of the student unions lies here: defending rights of a contract most youngsters in the same position are not able to access before having passed several short contracts. Wouldn’t it be more accurate to fight for the rights of students and first-time job seekers by merely denouncing the duality in the working contracts and the precariousness of short-term contracts in the actual system?

Flexibility and equality go together in a single employment contract

In fact, the difference between workers employed in a CDD and a CDI cannot continue if we want to stick to the reality of the job market today and reduce intergenerational injustice which is a crucial matter related to it. If the draft bill, as it is envisaged by the government for now, might on the long term have beneficial effects by reducing the unemployment rate and enhancing the competitiveness of the French economy, it however neglects to abolish the distinction between short and long-term working contracts which constitutes, in a difficult economic context, a fundamental injustice in regard to the access to employment.

In fact, the two different working contracts could merge into one and only, more flexible contract, with a non-renewable internship possibility of maximum six months, and provide restricted exceptions for replacement workers (interimaire) or seasonal workers, justified on objective, verifiable economic reasons. If this seems delicate to implement on a political level regarding the great resistance the law already faces, it represents, however, the most efficient way to increase flexibility while insisting on more equal working conditions for everyone and thus reduce unemployment and precarity.

Precarity is what we have today; more flexibility is what can turn the tide tomorrow

A single, more flexible working contract does not have to be mixed up with more precarity. Everything depends on the conditions that are attached to it. If it is an economic necessity for a company to lay off a worker, it should have the right to do so more easily, encouraging de facto businesses to take higher risks when the order books are well furnished and thus to employ. If the laying off is not justified by an economic necessity nor a serious professional fault, an accurate compensation regarding several months of salary will have to be granted to the worker, making it possible for the latter to look for the next job in reasonable conditions. In addition to this, if necessary, essential or continuous training has to be encouraged to restrain the inactivity period to a strict minimum. The termination payments should be fixed in advance, as it is conceived for now, on a progressive scale with a more generous compensation, avoiding laid off workers to fall into precarity before finding the next job. In retun, the increased termination benefits should be conditioned on the willingness of a worker to look actively for the next job. Talking about precarity, there is nothing more precarious than a total unemployment rate of 10% with youth unemployment brushing past 25%. Thus, there is nothing more unjust than the status quo. The need to radically rethink the perception of today’s job market is of primary importance. Flexibility is undeniably part of the solution.

The “code du travail” should prescribe a clear framework for workers rights, termination benefits and set the borders of national as well as sectorial negotiations. It is not sustainable that employers need to be specialized lawyers in labor law to understand the legal situation they find themselves in.

A more flexible working contract implies as well to revise the terms of the agreement regarding the economic situation in the sector. If a company does well in an economic sector that does well, workers should be able to profit from it by being granted better working conditions. On the contrary, it is also necessary to make apparent concessions to allow the company and the sector to get back on track.

For this to work, it is, nevertheless, necessary to increase the representability of labor unions by encouraging workers to adhere to them and to improve the social dialogue between labor unions and employer organizations, both on a national level and on a company level, which is too often flawed in France. A good working social dialogue is, however, an absolute prerequisite for a reliable and more flexible job contract, whose conditions could be adapted through company agreements as well as through social partner negotiations’ to the needs of the market.

A bold reform takes more than a mere revision of the CDI. Countries like Denmark paved the way already a long time ago and reduced the unemployment rate by 50% while at the same time having one of the most generous welfare states in the world. If every country is different, one thing yet remains the same: there is no growth without innovation.