Macron tackles thorny issue of seeking labor reform

The French unemployment rate has hovered above 10 percent for years. Indeed, during the Hollande presidency from 2012 to 2017, it was the highest since 2000. Now, with a young reform-minded president Emmanuel Macron at the helm, France has a rare opportunity to make structural changes for economic revitalization.

The main problem is that the French labor market is extremely rigid and overregulated. Laws make it expensive to hire full-time workers. According to the Heritage Foundation Index of Economic Freedom, France is the 72nd most liberalized economy in the world, with particularly poor rankings for ease of hiring -- 44.1 (out of 100).

By comparison, China scored 63.4 on labor freedom, and some of the most liberalized countries in Europe, like Denmark, the U.K., Switzerland, and the Netherlands, scored in the 70’s and 80’s, and such “sick” countries like Spain and Greece, managed to reach the 50’s.

To some degree, there are trade-offs between making it easy to hire and protecting employee benefits. If there are tough laws regulating when and why employees can be fired and the potential to win unlimited payouts for wrongful termination, employees can feel at ease.

However, when the regulatory process goes overboard, it can ultimately hurt many potential employees. Those who already have a job are protected, but if you can’t find a job that’s no comfort.

That’s the problem in France. The unemployment rate is two points above the EU average, while youth unemployment is three points higher. GDP growth has been consistently trailing that of the U.K., the U.S., Germany, and the Netherlands since 2014.

If this continues, not only will French people have trouble making a living, the government will also have trouble funding its generous public benefits. With tax revenue drying up, debt to GDP is getting close to 100 percent.

In order to combat economic malaise, Macron has proposed a wide-ranging set of reforms broadly aimed at encouraging hiring by making it less expensive and burdensome for firms to do so. Among the proposals are plans to cap damages on unfair dismissal claims, cut payroll taxes on overtime, introduce flexibility on mandatory minimum protection, and cut 120,000 civil service jobs.

Cutting down on red tape should make it easier for the young and unemployed to get a real full-time job rather than the temporary jobs to which many are relegated in the two-track system.

At the same time, there are also plans to better protect employees. Their representation on company boards would be encouraged; companies that don’t pay equal wages would be named and shamed, and taxes would be levied on companies that rely heavily on temporary contracts. By lowering the cost of hiring full-time employees while raising the cost of hiring temporary employees, there will be a carrot-and-stick mechanism in operation.

However, the question is: Can Macron get it done? Past French presidents have tried and failed after facing outcry and disruptive protests. Admittedly, Macron comes in with strong public support and a large majority in the National Assembly. His En Marche party controls 314 of 577 seats after a resounding victory in last month’s parliamentary elections.

The Republicans, who control an additional 100 seats in the Assembly and a plurality in Senate, have supported past labor market reforms.

Macron has shown himself strong on the world stage, too. Greeting Donald Trump in May, he pulled hard on Trump’s famous tight handshake grip and outmuscled him. He shifted policy on Syria, turning against unwise regime change, and hasn’t looked back since. It is reassuring to see him bring a counterbalance on the world stage to right-wing populism.

Many of France’s problems, however, are local. Whether or not he can reform France has more to do with domestic policies than wrangling with Trump, Merkel, and Putin over free trade, sanctions, and treaties. At a time when it seems like the world order is in tatters, here is a reminder that national destiny remains in the hands of local people.

Mitchell Blatt is a columnist with China.org.cn. For more information please visit:

http://www.china.org.cn/opinion/MitchellBlatt.htm

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