French CEOs Sharpen Calls for Labor Market Reform

France’s top executives are letting go of anger and lament and calling for action on labor market reform.

Top executives of companies ranging from Air France-KLM to Michelin & Cie meeting in Aix-en-Provence on July 5 displayed neither the jeering of ministers that marked the gathering in 2013 nor the despair that characterized it last year.

As tax cuts finally feed through to businesses and the economy recovers for the first time under President Francois Hollande, they relentlessly pursued demands for more flexible labor rules, lower payroll charges and improved training.

“The good news is that the European economy is improving and what the government is doing is a move in the right direction,” Jacques Aschenbroich, chief executive officer of auto parts maker Valeo SA, said in an interview. “Now we are starting to look at what needs to be done next.”

The executives’ mood matters to Hollande, who has pushed them to increase investment in order to generate the economic growth and job creation that eluded him in the first three years of his presidency. In that period, the economy’s average expansion was less than 0.5 percent a year, driving jobless claims to a record.

Spending Cuts

Knowing he will have to do better in the next two years to stand a chance of re-election, Hollande is implementing a plan to cut spending by 50 billion euros ($54 billion) and channel most of that into tax credits or lower social charges for business. He and Economy Minister Emmanuel Macron have also forced through an omnibus law easing restrictions on business in areas as diverse as Sunday store opening and job cuts.

For executives at the Rencontres Economiques conference in Aix, though, this isn’t enough.

Valeo, which has just 18 percent of its employees in France, pays more than half of its global social charges there.

It’s the sort of statistic on every CEO’s lips. Air France-KLM’s Alexandre de Juniac said that labor represents 30 percent of the carrier’s cost base, compared with 22 percent for its peers.

“We’re under phenomenal competitive pressure,” de Juniac said. “The cost of labor is an absolutely key factor.”

French Cliches

Cost is far from being the only issue. The need for a more flexible workforce in a global economy also tops the list of things companies say they need to succeed against international competitors.

“It can take 15 months to change an agreement for a given group of employees,” de Juniac said. “I don’t think some of our international competitors could imagine that, we need labor rules that allow us to adapt more quickly.”

Jean-Pierre Clamadieu, chief executive of chemical maker Solvay, and Michelin CEO Jean-Dominique Senard agreed.

“Flexibility doesn’t mean we hire someone one day and fire them the next,” Clamadieu said. “It takes 18 months to properly train an employee. But it does mean that we are able to face rapid changes in client demand.”

Senard called for concessions in France’s labor code -- a document that runs to more than 3,000 pages. “Clients are asking us to be more and more flexible, the international economy is more and more volatile,” he said.

Improved training and internships were also widely discussed, with Senard blasting the government for spending money on subsidized short-term jobs, mostly in the public sector.

In Aix, Labor Minister Francois Rebsamen could only point out that French unemployment rate remains just below the all-time high of 10.2 percent reached in 1996. The remark drew boos from the audience.

For all that French angst, the irony wasn’t lost on Belgian Deputy Prime Minister Didier Reynders: “Against the cliches about France, I’d say this: I’ve been invited to talk about work in France at 8 a.m. on a Sunday.”

French Economy Beats Forecasts With Fastest Growth Since 2013 French Jobless Claims Rise to Record, Defying Hollande Recovery

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