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In June 2005, France's new Prime Minister, Dominique de Villepin, presented an emergency employment plan, against a backdrop of rising unemployment. The plan has three main strands: recruitment by small businesses; a return to work for long-term unemployed people; and access to employment for young people and the over-50s. One of the flagship measures, and the most controversial for trade unions, introduces a new type of open-ended employment contract for new recruits in smaller firms.
The government led by Prime Minister Jean-Pierre Raffarin resigned after the EU Constitutional Treaty was rejected in a referendum by French voters in May 2005. Dominique de Villepin, from the same conservative party as Mr Raffarin, was appointed as the head of a new government.
Despite a slight recovery in employment levels in 2004, unemployment continues to rise, to 10.2% of the active population in March 2005, according to the National Institute for Economic Studies and Statistics (Institut national de la statistique et des études économiques, INSEE) employment survey. The persistence of unemployment, identified by opinion polls as the greatest source of anxiety among French people, is seen as one of the causes of the political crisis underlined by the 'No' campaign’s victory in the referendum on the EU Constitutional Treaty (FR0505103N). As soon as it had been sworn in, the new government led by Prime Minister Villepin presented an emergency plan for employment, backed by EUR 4.5 billion of state funding in 2006, as well as the resources already committed to employment policy, basically through exemptions from employers’ social security contributions. This plan will be funded by 'a pause in the process of lowering income tax'. However, the new Prime Minister stated that public expenditure would not rise faster than inflation in 2006.
The only general policy measure in the plan is an objective of abolishing employers’ social security contributions on wages equivalent to the value of the SMIC minimum wage by 2007.
The plan has three main strands: recruitment by small businesses; a return to work for long-term unemployed people; and access to employment for young people and the over-50s.
Encouraging small businesses to create jobs
Three elements of the employment plan focus on small businesses, and are aimed at simplifying recruitment procedures:
- a new employment cheque (chèque-emploi), available online, may replace employment contracts and wage slips.
- a new type of open-ended employment contract, the 'new recruitment contract' (contrat nouvelle embauche), available to smaller firms, will allow for a longer probation period (two years, as opposed to the current three months). In theory, during the probation period, the employee may be dismissed orally and this entails no entitlement to compensation. To counterbalance the flexibility this affords the employer, this contract will establish financial compensation for the employee if the contract is terminated before the end of the two-year probation period, along with individual assistance and new redeployment methods. These features are still to be defined (see below); and
- the state will cover the extra employers’ social security contributions (up to EUR 5,000) pertaining to the 10th employee recruited by a small firm, and to the following nine recruits.
Facilitating and monitoring the return to work of unemployed people
The government has called upon the public employment service and its private sector partners (FR0506105F) 'to mobilise in order to facilitate redeployment during the initial months of unemployment'. The coordination of activities and the closer working relationship between the National Employment Agency (Agence nationale pour l’emploi, ANPE) and the National Union for Employment in Industry and Commerce (Union nationale interprofessionnelle pour l’emploi dans l’industrie et le commerce, UNEDIC), embodied in shared computer files and the establishment of job centres (FR0409104F), will enable each jobseeker 'to establish a personal relationship with the person responsible for directing his/her search for work'.
A EUR 1,000 bonus will be paid by the state to anyone on minimum social benefits and unemployed for more than a year who accepts a job offer.
The current sanctions for 'abuse' of unemployment benefit will be applied in a more automatic fashion, especially when someone has repeatedly refused offers of reasonable employment (FR0403104F).
Helping young people and the over-50s
The unemployment rate for young people is far above the average rate for the active population - 17.5% for 15-29 year-olds in 2004 as opposed to 9.9% for 15-64 year-olds. For young people who emerge from secondary education with no qualifications, ie 20% of all school-leavers, this rate stood at 42% in 2004. The new plan provides for:
- a personal interview for 57,000 young people who have been unemployed for more than a year, by the end of September 2005;
- young people who take jobs in industries experiencing labour shortages to be granted a tax credit worth EUR 1,000;
- a fivefold increase in the number of state-subsidised contracts in the non-competitive sector, provided for in the 2004 social cohesion law (FR0409104F);
- a 'customised military service' ('service militaire adapté') scheme to enable unqualified young people who so wish to go on training courses officially validated by the Ministry of Education. The goal is to train 20,000 young people on this scheme in 2007; and
- no longer including workers under the age of 25 in the calculation of the workforce-size thresholds of 10 and 50 employees, above which companies must hold elections for workforce delegates and a works council respectively (FR0309102T).
People aged over 50 will be granted a waiver on the age limit for taking civil service entrance examinations and increased flexibility in the rules on working and receiving pensions at the same time. Moreover, the scrapping of the 'Delalande contribution' (a contribution that firms have to pay into the UNEDIC unemployment insurance fund when terminating the contract of an employee aged 50 or over) is under consideration.
Reactions
The Prime Minister is to use decrees to implement within 100 days the policies announced. Most trade unions feel that this decision to move ahead without parliamentary debate does not bode well for the consultation process also sought by the government.
Trade union discontent has crystallised around the establishment of the 'new recruitment contract' which, according to all the unions, comprises an unacceptable means of undermining open-ended employment contracts. The unions have also strongly criticised the possible challenge to the obligations incumbent on companies whose workforce exceeds certain thresholds - relating to mandatory medical check-ups, social security contributions and staff representation. Further, the unions have stressed the substantial financial advantages granted to employers, which will now be exempt from paying social security contributions on wages equivalent to the SMIC, and have warned that 'low-wage traps' may increase as a result of this policy.
The General Confederation of Labour (Confédération générale du travail, CGT) immediately called for a national day of action to be held on 21 June 2005, but its call was not echoed by any other union confederation. The General Confederation of Labour-Force ouvrière (Confédération générale du travail-Force ouvrière, CGT-FO) felt such action would be too hasty and is making preparations for a set of protests in early September. On the issue of leaving young people out of the calculation of thresholds triggering the necessity for staff representation, CGT-FO has stated that it will be making an official complaint to the International Labour Organisation (ILO) on the grounds of age discrimination. The French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT) emphasised a perceived imbalance engendered by greater flexibility for the employer and fewer guarantees in terms of security for workers, but has adopted a 'wait-and-see' policy before deciding whether to take action in September.
The Movement of French Enterprises (Mouvement des entreprises de France, MEDEF) employers' confederation stated that the plan is a step in the right direction, while the General Confederation of Small and Medium-sized Enterprises (Confédération générale des petites et moyennes entreprises, CGPME) interprets the policy as giving fresh impetus to the economy, and the Craftwork Employers’ Association (Union professionnelle artisanale, UPA) gave it a very warm welcome.
Commentary
When he presented the bill empowering the government to legislate by decree on 28 June 2005, the Prime Minister announced a few amendments to the original emergency employment plan:
- the 'new recruitment contract' will be available to businesses with up to 20 employees rather than the 10 originally stated. This extension is a response to a firm request made by both the Union for a People’s Movement (Union pour un movement populaire, UMP) political party and UPA;
- with regard to the 'new recruitment contract', instead of a probation period, the Prime Minister now refers to a two-year 'period of job consolidation'. Over this period, the employer will retain the right to dismiss the employee without having to state any reasons, but two weeks’ notice (in the first six months of the contract) must be given before ending the contract. This period will increase the longer the employee has been with the employer; and
- the compensation payment owed by the firm on the termination of a 'new recruitment contract' will 'depend on the level of the wage'. A 'contribution to redeployment costs' may also be payable.
Rather than beginning a wide round of consultation, the government has opted to push ahead with its policy. The 'new recruitment contract' will come into force as early as 1 September 2005. Despite many references having been made to the 'Danish model', the employment plan is arguably far from being a negotiated flexicurity model dealing with the entire employer-employee relationship in a consistent and balanced way. (Florence Lefresne, IRES)