Labour Market Measures in France 2008–13: The Crisis and Beyond Author Bruno Coquet FRANCE Copyright © International Labour Organization 2015 First published 2015 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Licensing), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with a reproduction rights organization may make copies in accord- ance with the licences issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organ- ization in your country. Coquet, Bruno Labour market measures in France 2008–13 : the crisis and beyond / Bruno Coquet; International Labour Office, Research Department. – Geneva: ILO, 2015 ISBN 978-92-2-129762-8 (web pdf) International Labour Office Research Dept. labour market policy / employment security / unemployment benefit / promotion of employment / wages / employment policy / trend / France 13.01.2 Also available for Germany ISBN 978-92-2-129770-3 (web pdf); Greece ISBN 978-92-2-129766-6 (web pdf); Ireland ISBN 978-92-2-129768-0 (web pdf); Italy ISBN 978-92-2-129772-7 (web pdf); Latvia ISBN 978-92-2-129774-1 (web pdf); Netherlands ISBN 978-92-2129782-6 (web pdf); Poland ISBN 978-92-2-129776-5 (web pdf); Spain ISBN 978-92-2-129778-9 (web pdf); Sweden ISBN 978-92-2-129780-2 (web pdf); United Kingdom ISBN 978-92-2-129760-4 (web pdf). A synthesis report of the above monographs entitled Inventory of labour market policy measures in the EU 2008–13: The crisis and beyond is also available. ISBN 978-92-2-130246-9 (print pdf); ISBN 978-92-2-130247-6 (web pdf) ILO Cataloguing in Publication Data The designations employed in ILO publications, which are in conformity with United Nations practice, and the pres- entation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications and digital products can be obtained through major booksellers and digital distribution platforms, or ordered directly from [email protected]. For more information, visit our website: www.ilo.org/publns or contact [email protected]. This publication was produced by the Document and Publications Production, Printing and Distribution Branch (PRODOC) of the ILO. Graphic and typographic design, layout and composition, electronic publishing and distribution. PRODOC endeavours to use paper sourced from forests managed in an environmentally sustainable and socially responsible manner. Code: WEI FRANCE 2 Contents 1. Introduction 5 1.1 The macroeconomic impact of the crisis 5 1.2 Main labour market developments 11 2. Contractual arrangements and Employment Protection Legislation (EPL) 15 2.1 The context 15 2.1.1 Change in OECD-EPL indicator 18 2.1.2 Labour contracts 20 2.1.3 Working time and Sunday rest 22 2.1.4 Contract termination 25 3. Wages 28 3.1 Wage-setting institutions 28 3.2 Trends before the crisis 28 3.2.1 Structural trends: Wages, labour productivity, wage differential 28 3.2.2 Wage dynamics influenced by working time and labour cost policies 29 3.2.3 Minimum wage and wage bargaining at branch level 29 3.3 The impact of the crisis on wages 33 3.3.1 Puzzling trends 33 3.3.2 Composition effects 34 3.3.3 Wage setting 36 3.3.4 Wage and revenue differential 38 4. Unemployment insurance 41 4.1 Unemployment Insurance in France 41 4.1.1 Organization 41 4.1.2 Coverage and recipients’ characteristics 41 4.2 Conventional views of the French UI system 44 4.3 Debate and negotiations during the decade before the crisis 45 4.3.1 From 2001 to 2008 45 4.3.2 Changes between 2009 and 2013 45 4.4 Structural challenges are still greater than difficulties due to the crisis 49 4.4.1 Not only one UI system, but four 49 Contents FRANCE 3 4.4.2 Current labour market conditions and use of UI 51 4.4.3 Benefits “generosity”: the replacement rate 51 4.4.4 Other aspects of benefits “generosity” 52 4.5 The 2014 round of negotiations 55 4.5.1 Context and stakeholders’ goals 55 4.5.2 Reforms enacted 55 5. Active labour market policies (ALMPs) 57 5.1 General background 57 5.2 From unspecific policies to programmes focused on vulnerable groups 58 5.2.1 The golden age of subsidized public jobs 60 5.2.2 Refocusing subsidies to enhance efficiency 61 5.2.3 Phasing out subsidized jobs 61 5.2.4 Fewer and simpler tools to improve efficiency 62 5.2.5 From structural reforms to counter-cyclical policies 63 5.3 Public Employment Service 65 5.3.1 Ten years of the Public Employment Service: From birth to reform 65 5.3.2 Assistance to Jobseekers and monitoring 68 5.3.3 Obligations and sanctions for UI recipients 70 5.3.4 PES, services to employers 71 5.4 Lifelong learning 71 5.4.1 A complex organization delivering poor results 71 5.4.2 Reforming is difficult and slow 72 5.4.3 Public policy initiatives to fight the crisis 76 Conclusion 78 Bibliography 79 Glossary 84 Chronology of labour market reforms (2002–14) 86 Contents FRANCE 4 Introduction1 1 1.1 The macroeconomic impact smoothing again in 2013, unemployment is still on a of the crisis rising trend. In absolute terms, the population of the un- employed reached its highest levels ever: 5.8 million un- Since 2008 the French economy has been hit hard, first by employed were registered with the Public Employment the global recession and later by the unfolding in stability Service, among which 5.1 million were “actively in the Eurozone. While having been hit sooner than searching a job” in September 2014 (Dares, 2014b). most of the Eurozone, France was more efficient in lim- iting the output decline in 2010, and again in 2012 and As regards the impact of the economic crisis on both 2013. On average, GDP declined slightly more in the rest economic activity and the labour market, France has of the Eurozone than in France, where output caught up had a median record since 2007 (figures 3–6). France’s with its pre-crisis level in 2013 (figures 1 and 2). policy management during the crisis is widely recog- In 2009, output suddenly stalled in France as well as nized for its efficiency in cushioning the main effects in most European countries, but companies reduced of the crisis, both on output and the labour market. employment more slowly than during previous reces- Indeed, France benefited from powerful automatic sta- sions (figure 6). Despite more than 360,000 jobs being bilizers (in particular Unemployment Insurance and destroyed by the end of 2009, France experienced un- poverty allowances, RSA). As a consequence, France precedented job retention, in particular in the industrial experienced only a moderate decline in output despite sector, where companies maintained output capacity negative fiscal impulses of the same magnitude as those well above needs (see figure 6 in Heyer et al., 2013). of other big Eurozone members such as Italy (table 1). Since 2010, fiscal austerity has been tighter in France This did not prevent an impressive rise in unemployment: than in the rest of the Eurozone, leading to weaker between 2008 and 2009 the unemployment rate output growth but no distinctive effects on both labour grew from its lowest level since the early 1980s to its market performance and public finances. highest level since the late 1990s. After stabilizing for a while, from 2011 a second wave of the crisis sent the Positive outcomes as regards crisis management and the unemployment rate up to 10.4 per cent in 2013, near capacity of economic institutions to shield French com- its post-war record (10.8 per cent in 1997). While panies and people from the worst effects of the business Table 1. Fiscal stimulus in seven big OECD countries, 2008–13 2008–09 2010 2011 2012 2013 2010–13 2008–13 Germany 0.7 1.4 –1.2 –1.0 0.0 –0.8 –0.1 France 2.6 –0.5 –1.8 –1.1 –1.2 –4.6 –2.0 Italy 0.4 –0.9 –0.2 –2.7 –0.4 –4.2 –3.8 Spain 4.4 –1.4 –1.0 –3.7 –1.6 –7.7 –3.3 United Kingdom 3.4 –2.7 –3.2 –0.5 –1.0 –7.4 –4.0 USA 6.8 –0.8 –1.3 –1.4 –1.5 –5.0 1.8 Japan 3.9 0.5 0.5 0.5 0.6 2.1 6.0 Source: Heyer & al. (2013). 1. Bruno Coquet is a Research Fellow of the Observatoire Français des Conjonctures Economiques (OFCE), and a Policy Fellow of the Institute for the Study of Labor (IZA).