The changes would include giving employers more flexibility to reduce working hours in times of economic distress without incurring union strikes. High levels of compensation that courts can award to laid-off workers would be trimmed. The five-year period that former employees now have to contest layoffs would be reduced, a shift that Medef, France’s employers’ union, said would “reduce the fear of hiring” by businesses.
President François Hollande has said the changes are needed to burnish France’s international allure as a place to do business, and the accord capped weeks of sparring among the five top labor unions and Medef.
The labor measures would help address what Louis Gallois, Mr. Hollande’s investment commissioner, has called a “two-speed” labor market in France. Under that system, employees on long-term contracts enjoy extensive, costly job protections and benefits, while temporary workers, whose ranks have surged to a third of the French labor force, have minimal job security and relatively few benefits.
In November, the government introduced a tax credit for companies, potentially worth a total of 20 billion euros ($26 billion), aimed at easing high employment costs. In exchange, business negotiators agreed on Friday, as a concession to unions, to pay higher taxes for short-term work contracts. Two hard-line unions, the Confédération générale du travail and the Force Ouvrière, rejected the offer as insufficient and refused to sign the deal, which was nonetheless binding because France’s three other main labor unions backed it. A formal agreement will be signed next week.
The tax would help expand government coffers meant to support the unemployed while also nudging employers toward favoring long-term contracts. Employers would also pay somewhat higher contributions for private health insurance.
The deal “will change life for businesses in France,” Laurence Parisot, the president of Medef, said in a statement. “This marks the advent of a culture of compromise after decades of a philosophy of social antagonism.”
The negotiations were clouded recently by a series of public episodes, including a government threat to nationalize an ArcelorMittal plant in France to preserve jobs. There was also the decision in the last week by the French actor Gérard Depardieu to take Russian citizenship to escape a proposed 75 percent marginal tax rate on incomes of more than 1 million euros ($1.3 million).
Whether any of the changes will come fast enough to fix France’s problems is an open question. Some economists say that France could become the next sick nation of Europe if it does not improve the environment for investment and hiring.
“Given the gap we still have between the level of labor market regulation in France and in countries like the United States, Britain and Ireland, it is very clear that when observers look at the outcome, they will say it’s a step in the right direction, but not enough,” said Dominique Barbet, the European economist for BNP Paribas in Paris.
“But we also need to keep in mind that in France, if you want to make reforms, you have to go through small steps first,” he said. “You can’t try to change the system overnight. That usually results in mass protests in the streets.”
Mr. Hollande’s government is expected to sign off on the deal. He has said it will help him keep a promise of reducing unemployment, now at a 13-year high of 10.7 percent, by the end of the year. Youth unemployment is about 25 percent. By contrast, unemployment in Germany, which last decade made deeper cuts to labor costs and regulations than France is doing, is at 6.9 percent and joblessness among the young is around 8 percent.
Article source: http://www.nytimes.com/2013/01/12/business/global/france-near-deal-to-simplify-labor-regulations.html?partner=rss&emc=rss