France: Social partners' views on labour market initiatives

The government's new labour market measures, particularly the introduction of new employment contracts for young people, have been a focus for social unrest in recent months. In this feature, we examine the context of the new contracts for young people and recruits to small firms, and the measures for older workers. We also look at the social partners' views on recent developments, based on exclusive interviews with EIRR.

Background

When Dominique de Villepin was appointed prime minister at the beginning of June 2005, he declared that lowering unemployment was the "number one objective" of his government. Since then, he has introduced a range of measures designed to boost employment.

Contracts for new recruits in small firms

The first set of six measures was contained in a text adopted by parliament in July 2005 (France: New employment measures) and included a new type of employment contract of indefinite duration for new recruits (contrat nouvelle embauche, CNE). Designed to promote employment in companies of up to 20 employees, it introduces more flexible severance conditions during the first two years of employment, allowing employers to dismiss workers without needing to give a reason. Once this "consolidation period" is over, the CNE automatically becomes a "normal" open-ended contract (contrat à durée indeterminée, CDI). All the measures were implemented by legislative decree on 3 August, and were expected to come into force in September 2005. However, De Villepin took everyone by surprise and brought forward the commencement date of the ordinance to 4 August.

A survey of 300 managers carried out by Fiducial, a company providing business outsourcing services for small companies, found that during the first six months of its existence, the CNE accounted for three out of 10 new employment relationships at enterprises with fewer than 20 employees (France: New contract creates employment). As yet, there are no official data on the numbers of these contracts that have been terminated.

Contracts for young people

In response to the social unrest that took place in the suburbs of many French cities in October and November 2005, draft equality of opportunity legislation was presented to the council of ministers at the beginning of January 2006 (France: New measures to improve equality of opportunity and France: Draft equality of opportunity legislation). On 16 January, without any consultation with the social partners, De Villepin announced the introduction of a new type of employment contract for young people under the age of 26 (with flexible severance conditions similar to the CNE) as part of the draft legislation (EIRR 386 p.20).

This new starters' contract (contrat première embauche, CPE) was fiercely criticised by trade unions and student organisations, which organised several days of demonstrations and strikes across France during February, March and April 2006. Although the legislation was adopted by parliament (France: Government pushes through equality legislation) and promulgated by law by President Jacques Chirac on 31 March 2006, the government issued a letter on 3 April requesting that employers did not start using the CPE because art. 8, relating to the new contracts, was going to be changed. To "guarantee the legality" of any new CPEs concluded, employers were asked to wait until the further changes to the legislation come into force. At the time, this was seized on by the FO trade union confederation as "incomprehensible and unacceptable" behaviour, and the unions reiterated their call for a second reading of the legislation, with the objective of withdrawing the CPE.

Just one week later, and in the face of continued resistance to the new contracts, the prime minister announced that the CPE was to be dropped. In its place, the government will introduce a set of measures specifically to help young people who are having difficulty finding work to integrate into the labour market.

Increasing the employment of older people

Boosting employment among older people has also been a focus for the government's energies. In December 2005, the social partners concluded a new national multi-sector agreement on the subject of employing older workers (France: National accord on older workers) and the prime minister subsequently announced a government plan to promote the employment of older people (France: Second stage of the government's employment plan). This was due to be launched at a special conference at the end of March 2006, but it was postponed when the union confederations announced that they were planning to boycott it as long as the government insisted on continuing with its plans to implement the CPE.

EIRR talked to key social partner and government actors about these initiatives and also asked them to identify what they thought would be the crucial issues of the future.

New employment contracts

CNE/CPE contracts - government aims

Eric Aubry, a general inspector of social affairs, highlighted the fact that the prime minister's absolute priority was to fight unemployment, which was why he decided last June to create the CNE, to bypass the problems associated with recruiting workers and to cut the existing red tape. At the same time, Aubry pointed out that although under the new contracts the normal statutory provisions governing dismissal have been relaxed, all the normal rules governing unfair dismissal still apply. These cover areas such as dismissal on grounds of pregnancy, union membership or sickness. He stated that legislation on dismissal (which defines unfair dismissal) has been in place since 1973, and this is the first time that the government has ever attempted to change it - unlike arrangements governing collective redundancy, which, he noted, are subject to more frequent modification.

Representatives of the office of the employment minister, Gérard Larcher, said the government had wanted to offer very small companies simplified conditions for terminating employment contracts; they stressed that all the usual grounds for unfair dismissal still apply. It was explained that the main change is the fact that the rule requiring employers to give proof of reasonable cause for the dismissal does not apply to terminations of CNE contracts during the first two years (the "consolidation period").

They underlined the fact that it is hard for small companies to predict their long-term future, and that the two-year consolidation period gives employers more time to judge whether they can afford to keep on a newly recruited employee (probationary periods for open-ended contracts are usually between one and six months). They acknowledged that there had been some consultation with the social partners before the CNE was introduced and they stressed the guarantees provided for employees under a CNE, such as the requirement for the contract to be in writing and the fact that the entitlement to severance pay (indemnité de rupture) accrues from the beginning of the contract. Under a CDI, this generally only begins once the employee has fulfilled two years of service. The representatives stressed that a CNE is a normal open-ended contract, apart from the easier termination arrangements during the two-year consolidation period.

As to whether or not the new contracts have really created employment, Aubry commented that it was too soon to tell, although he acknowledged that critics of the measure maintain that no new jobs will be created, claiming instead that employers will substitute one type of open-ended contract for another by choosing one with easier dismissal arrangements in preference to one that offers the employee more security.

The employment minister's office clarified that the prime minister's idea for a CPE contract for young people came about at the beginning of 2006 when he decided to focus on boosting employment for younger and older people and that it had not been discussed with the social partners. France has problems with employment at both ends of the age range; according to the latest data released by the Ministry of Employment's Office for Research and Statistics (Direction de l'animation de la recherche, des études et des statistiques du ministère de l'emploi, DARES), unemployment for under-25-year-olds is running at just over 22% (see box below), with employment rates for this age group only 26.4%. In addition, data from the Organisation for Economic Cooperation and Development (OECD) place France below the EU15 average for employment rates of 55- to 64-year-olds (see table below). The representatives of Larcher's office explained that the prime minister had decided to present plans for the CPE to parliament as a result of the experience with the CNE, emphasising the additional guarantees for young people contained in the contract.

With regard to the CPE, Aubry observed that, since prime minister Edouard Balladur's attempts to introduce a special minimum wage level for young people in 1968 (the so-called smic jeune), the issue of young people is "very sensitive".

Employers' reaction

EIRR's interviews were carried out before the main demonstrations against the CPE had taken place, but even then the "battle lines" were apparent. Chantal Foulon, deputy director of social relations at the employers' confederation Medef, told EIRR that the government was "taking the right approach" with regard to some of its measures designed to boost employment, although she also added that she did not think that the CPE was the best solution; she would have preferred the CNE, which is restricted to small enterprises of 20 employees or fewer, to be extended to cover more companies.

Foulon complained about the complex collective dismissal laws in France, noting that the dense case law discourages employers from recruiting workers. Further, she said that more fixed-term contracts are concluded than are strictly appropriate. Another result, she noted, is a high level of subcontracting. Additionally, she commented on the problems that can arise at the end of contracts, such as claims for unfair dismissal, and she called for more general flexibility to enable employers to modify contractual arrangements.

While acknowledging that youth unemployment is a problem for France, Foulon also made the point that many young people are studying and are therefore not in a position to take on full-time work. In her opinion, a far greater problem was related to young people having poor qualifications. In this context, she felt that it was crucial to improve vocational training. The CPE contract, she said, discriminated against young people. By contrast, she welcomed lowering the age limit for apprentices, from 16 to 14 (a measure contained in the equality of opportunity legislation), which, she felt, may help more young people to achieve qualifications, and she called for apprenticeship contracts to be developed further.

Lack of consultation

For the union representatives, one of the greatest problems with the new contracts was the lack of consultation with the social partners - there had been little consultation before the CNE was introduced and none on the CPE. Didier Hotte, assistant to Jean-Claude Mailly, the general secretary of the FO union confederation, said that his union had been informed at 8am on the day of the prime minister's press conference on 16 January 2006 that he would announce the CPE. Jean Kaspar, former secretary general of the CFDT union confederation, stated that "the CNE had been introduced in a rush in the summer, and was implemented through a legislative decree; the CPE wasn't even discussed." The unions think it "scandalous" that people can be dismissed during the first two years of their contract without the employer having to give a proper reason. Hotte noted that sectoral agreements generally set out the arrangements for probationary periods for normal open-ended contracts; by contrast, the probationary period for these new contracts is now set out in legislation.

Although Hotte observed that small companies have expressed reluctance to hire workers because it was hard to dismiss them, in his opinion, this was not a reason to devise CNE and CPE contracts. He also believed that some employers had used the terms of the CNE to dismiss employees for no reason, but he did not expect the incidence of dismissals to increase significantly until 2007, when the first of the two-year consolidation periods were coming to an end. He also noted that it was difficult to conduct a proper analysis due to the limited number of CNEs concluded, although the first case law on this is now beginning to emerge.

Emmanuel Mermet, an economist at the CFDT union confederation, pointed out that the government's lack of consultation went against the spirit of legislation on social dialogue. He said "it creates parallel kinds of labour markets" and suspected that there would be a greater turnover in the workforce during the first two years of use of the CNE/CPE contracts. He also expressed his concern that there had been no evaluation of the CNE before extending it to the CPE.

Aubry acknowledged that the union confederations were "very unhappy" with the government's measures and observed that the CPE had been introduced without consultation. Further, he noted that the unions would have preferred such a measure to have been introduced in a dedicated Bill, which would have allowed for proper consultation and discussion. Instead, the government had amended the draft equality of opportunity legislation and then used an administrative procedure to ensure that the Bill was adopted.

Possible alternatives

In Mermet's opinion, there are already "too many different sorts of contracts". One issue that is regularly debated is whether or not France should have a single employment contract - as is the case, for instance, in the UK. However, this idea was not generally well received by any of EIRR's interviewees.

Measures for older people

By contrast, the government's measures to promote employment among older people were regarded as uncontroversial by EIRR's interviewees. Most noted that the national multi-sector agreement on the subject of employing older workers (France: National accord on older workers) was concluded after proper consultation, and the government's proposals for older people (plan senior) will closely follow the wording of this national agreement.

All the interviewees agreed that it was important to encourage older people to continue working. Apart from anything else, France, as is the case in many other developed countries, is facing an impending crisis in the pensions funding system. To this end, the French government introduced highly controversial pension reforms in 2003 (France: Controversy over planned pension reform). Larcher's office commented: "There is a culture of retiring before 60, even though the normal retirement age is 65 or 60, when a worker has all his years of service." It explained that the government wants to raise the average retirement age and had therefore removed the incentives for retiring early: "Your pension is proportionate to your years of service; there's not much incentive to stop working before you have worked for 40 years or before you reach the age of 65 because you lose some of your entitlement."

Larcher's office stressed how important it was for older people to maintain their productivity, and that it is a "waste of potential" if people retire too early. Also, they pointed out that people are living longer. The life expectancy of French people is among the longest in the EU.

Foulon observed that "there needs to be a change in the mindset". For a start, she claimed, "older people are always happy to leave work because there are good benefits schemes"; but, she noted, "enterprises are not keen to keep older people on".

One of the measures contained in the plan is the introduction of a special fixed-term employment contract (contrat à durée determinée, CDD) of up to 18 months in length for people over the age of 57, which may be renewed once. This, however, was not given an unconditional welcome by Hotte of the FO, who expressed the fear that employers might use the availability of the new contracts to dismiss older people and then rehire them on lower pay on the new contracts.

Although the FO has not signed the multisectoral accord (France: Second stage of the government's employment plan), Hotte highlighted the fact that some unions have concluded agreements - for example, in the construction industry - that allow workers to retire at 55 and receive 70% pay until they reach the age of 60. However, he pointed out that these agreements were already in place prior to government pension reforms in 2003.

Kaspar responded positively to the new national multisectoral agreement on promoting activity among older people and the government's proposals. He felt that it was important to increase employment among older people and he particularly welcomed some aspects of the plan, such as the idea to promote "mentoring".

The future

EIRR's interviewees identified a number of issues that they felt required urgent attention. The crucial need for better access to vocational training was highlighted by both Foulon and Aubry, with Aubry stressing how important it is for employees in small enterprises and workers with no qualifications. The employment minister's office, too, highlighted the need for training opportunities and the further development of day-release training schemes (alternance) and other training schemes for young people.

Foulon claimed that one of the greatest deterrents to employment is the cost of labour, saying that the level of employer social-insurance contributions is too high. Although the government is considering changing the entire basis of taxes and social contributions, she fears that "the proposals are too limited and will not be to the advantage of the high-technology companies, only helping manufacturing companies."

Hotte raised the issue of new forms of work, especially in the booming service sector (which he contrasted with a declining construction sector). In particular, he said that there is a need for consultation on homeworkers' terms and conditions, believing that they are often poorly informed about social conditions at their companies, that their pay is low and their stress levels are high. He said that there needs to be a constructive debate on how these workers can achieve a balance between work and their private lives. He commented that the unions have been calling for proper multi-sectoral talks between the social partners on this issue but, as yet, none have taken place. He also referred to the problem of subcontractors, stating his belief that their working conditions are often unacceptable.

The employment minister's office highlighted some of the government's current priorities, which include developing policies on working conditions, occupational safety and health, equal opportunities and how to prevent illegal labour.

Organisation for Economic Cooperation and Development employment statistics

The OECD recently published its "Factbook 2006", in which it highlighted France's relatively poor performance in the area of youth employment (those aged between 15 and 24 years), which is lower only in Hungary, Luxembourg and Poland. The daily business newspaper, Les Echos, reported that the chief statistician at the OECD suggested that the poor employment rate for this age group was in part due to the poor qualifications offered by French universities. It also published figures on the employment of older workers.