Economics

The French President Is Spending His Summer Fighting Unions

Macron wants major labor reforms in place by September.

Macron Seeks to Liberalize French Labor Market

President Emmanuel Macron is wasting no time tackling the most explosive item on his economic policy agenda: loosening France’s famously rigid labor laws.

On June 28, only 10 days after winning a majority in Parliament, he unveiled a package of far-reaching reforms, including measures fiercely opposed by labor unions that would give employers a stronger hand in collective bargaining and make it easier and less expensive for them to fire workers.

Macron is well aware of the challenge ahead. As economy minister under former President François Hollande, he helped write a labor reform law that was heavily diluted in the face of union resistance, and even so it sparked a revolt by lawmakers from Hollande’s Socialist Party, helping to make him the least popular French president in modern times. Street protests derailed reform efforts by conservative Presidents Nicolas Sarkozy and Jacques Chirac.

That’s why Macron plans to move quickly. This month, he’ll ask Parliament for legislation that would let the government enact labor reforms by decree, avoiding momentum-sapping debate and taking advantage of the summer holidays, when mobilizing opposition may be difficult.

French businesses have long chafed at France’s 3,000-page labor code, which dictates everything from the length of bathroom breaks and the size of office windows to the handling of work-related emails and phone calls after hours. (French employees have the right to ignore such intrusions when they’re off-duty.)

Macron and others say the rules are to blame for France’s persistently high unemployment rate, which has hovered near 10 percent for more than five years. Germany and Spain saw declines in joblessness after they introduced legislation to make labor laws more flexible. Young job seekers in France are especially disadvantaged, as older workers cling to protected positions and employers move jobs to countries where laws are less restrictive. Youth unemployment stands at 21.7 percent, and among those who have managed to land jobs, one-third are on temporary contracts that offer minimal protections. The use of such contracts has increased markedly since 2000. “Companies are afraid to hire,” says Pierre Gattaz, head of the employers association Medef. “The labor code is too complicated.”

Macron wants to streamline the process for layoffs, which can drag on for years, and place limits on severance payments ordered by worker-friendly labor tribunals. He also wants to let companies bargain directly with their workers rather than being bound by sectorwide agreements negotiated by unions. That’s likely to strengthen the hand of many employers because only about 8 percent of French workers are unionized, one of the lowest rates in Europe. Macron hasn’t proposed repealing the mostly symbolic 35-hour workweek, but he wants to let businesses negotiate flexible schedules with employees.

Labor activists are spoiling for a fight. The Confédération Générale du Travail, one of the country’s biggest and most militant labor groups, staged rallies in several cities in June. The more moderate Confédération Française Démocratique du Travail has said it’s willing to consider compromise on some issues, though its leader, Laurent Berger, warned in a June 18 newspaper interview that “the risks of protests and violence are great” if the new administration hardens its stance.

While his predecessor was hobbled by an inexperienced labor minister, Macron has picked a seasoned negotiator for the post. Muriel Pénicaud, the former head of personnel at French food giant Danone SA, has been meeting with unions and says she hopes they can agree on some points. But she’s made clear that Macron doesn’t intend to alter his timetable, which calls for having major reforms in place by September. “The presidential election showed that the French expect profound and rapid change,” Pénicaud told the French weekly Le Journal du Dimanche.

Because Macron is following through on a campaign promise, voters are unlikely to be shocked or outraged, says Bruno Cavalier, chief economist at Oddo Securities Corp. in Paris: “If people were opposed to this kind of reform, they wouldn’t have voted for him.” However, recent polls show the public is divided on what changes are needed. In a May 29 survey by Elabe, 50 percent said they favored some changes, but 56 percent opposed limiting severance payments.

For now, at least, Macron benefits from solid public support. A June 25 poll by the Ifop survey group showed his approval rating at 64 percent, up two points from a month earlier. He’s also enjoying an economic tailwind, as Bloomberg’s monthly survey of economists suggests growth will tick up from 1.2 percent in 2016 to 1.4 percent this year and 1.5 percent in 2018. Business confidence is strengthening, and manufacturing investment is forecast to grow 5 percent this year, far above the 1.8 percent average of the past five years, according to government statistics agency Insee.

Medef’s Gattaz says he’s confident Macron will succeed—if he acts now. “He has to move fast to capitalize on his legitimacy; the planets are aligned.” —With Gregory Viscusi

    BOTTOM LINE - Macron wants the Right to enact labor reforms by presidential decree, cutting down on debate and taking advantage of the summer holidays, when the public is distracted.
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