Macron’s labour market reforms put to the test

A first look at France’s labour market reforms, four months after coming into force.

GD/AD – 02/2018

As reported in the Financial Times, companies are testing the waters with caution. The reforms started with great expectations, said a representative from car manufacturer PSA (Peugeot/Citroen), but have quickly shown their limitations. The reforms allow companies to use ‘collective contractual terminations’ to lay off workers without the company having to prove that it is facing financial difficulties, as was previously the case. 

The provisions are supposed to increase flexibility and thus increase the willingness of French companies to take on new people as a way of counteracting the mass unemployment that has been plaguing France since 2009. Younger people find it particularly difficult to get a job. However, taking advantage of this new freedom is proving to be more difficult than at first thought because mandatory approval from unions is required. 

The Financial Times reported that PSA was able to reach a deal by offering generous redundancy packages, but that international clothing chain Pimkie was unable to reach an agreement with unions. It would appear that the minimum compensation stipulated by law is not enough. According to the Financial Times, unions are demanding compensation packages which go far beyond minimum requirements in order to strengthen their position and benefit their members. 

Critics believe that taking advantage of the new labour regulations is difficult, for example, for companies which are generally performing well but are short of cash. By ensuring the unions play a key role, Macron has managed to avoid the usual public showdowns seen in France. However, it is questionable whether these reforms can really do enough to improve France’s persistent high unemployment and the chronic difficulties facing young jobseekers. Moreover, it is difficult to recommend France as a location for foreign investment.