France’s ‘rigid’ labour market: Manuel Valls should get his facts right

The French Prime Minister has revived the idea that the French labour market is overly protective of permanent employees. However, international comparisons show that this is not the case, argues Duval Guillaume

“The functioning of the labour market is not satisfactory because it is not creating enough jobs, it generates significant inequalities between highly protected employees on permanent contracts and very precarious workers on fixed term  and agency contracts. We need to take action on this,” French prime minister Manuel Valls told France’s weekly magazine Nouvel Observateur on 22 October.

That the French economy is not creating enough jobs is unfortunately not in doubt, but contrary to what our Prime Minister seems to think, this is much more to do with inappropriate macroeconomic policy currently being pursued in France and Europe, combined with major structural problems of the French economy such as education, innovation, and the access to credit by companies than a supposed rigidity of the labour market. And it is certainly not in any case down to the excessive protection of permanent employees.

Manuel Valls is of course right to emphasize the very significant difficulties for casual workers in the labour market, including ever shorter term contracts routinely offered to them. However, it is wrong to assume that when they are in employment, employees on fixed-term contracts are less protected than permanent employees. This is exactly the opposite: fixed term contracts (CDD, Contract Durée Determinée) offer significant protections in France.

The OECD is an institution that brings together the leading rich countries to produce analysis and comparative statistics on major economic and social issues. It is takes a very neo-liberal stance on the labour market and we really cannot imagine a particular fondness for the “French social model”. It regularly compares the laws of all the rich countries and major emerging economies with respect to labour market rigidity and protection against dismissal and provides a composite index to measure this protection. Of all the countries it monitors, France is the country where short-term contracts are the most protective of employees. This is also probably not unconnected with the trend towards shorter fixed term contracts offered by companies.

But Manuel Valls is especially wrong to consider that permanent employees (CDI, Contract Durée Indeterminée) in France are strongly protected against dismissal (whether individual or collective dismissals).

According to the OECD, French permanent employees were certainly much better protected in 2013 than the US and the UK, but they were barely better protected than in Denmark – which is considered the ultimate in labour market flexibility, with their famous flexicurity – and on par with Korea. And the French permanent workforce is significantly less protected than in the currently fashionable Germany, despite the Schröder reforms, and in the Netherlands which is also often seen as a particularly strong model for the organization of the labour market.*

Protections are also weaker than in China and India, contrary to popular belief. In addition, these findings date to before the entry into force of the so-called job security law adopted in mid-2013, which further reduces barriers to collective redundancies.

In short, there really is very little to expect from these reforms, at least for those who are not blinded by ideology and the employers propaganda.

Translation by Revolting Europe

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*All these countries, by the way, enjoy significantly lower unemployment than France.