MarketLine Blog

Macron labor law reforms: Overdue changes to French labor laws are much needed victory for business

The envisioned reforms are wide-ranging and are easily the most ambitious set of labor market reforms to have made it this far intact. Previously, all efforts have floundered under the weight of popular protest. Although productivity remains healthy in the domestic economy, business growth has been stymied by bad regulation which deters job creation, especially for small businesses nearing the 50th employee threshold which makes the employer subject to an alarmingly complex and costly set of regulations. Bodies representing small and medium businesses are pleased with the outcome, hailing them as essential progress for competitiveness. Given the scope of change, Macron should be granted support from all interested parties now the regulatory system is being moved towards encouraging job growth rather than serving as deterrence.

The extent of change is not limited to smaller companies, either. Large companies have been hampered by rules determining reduction in staff levels in domestic operations based upon international performance. Instead of protecting jobs in France, the rules have discouraged their creation in the first instance as companies know there is likely to be substantial trouble if business risks at home fail to pay off. Furthermore, revisions to payouts in employment disputes and a simplification of when claims can be made will erode a major risk to employers. However, the reforms are not all good news. Changes to temporary contracts do not solve the problem of fewer people gaining permanent contracts. Instead reform to weaken the notoriously strong permanent contracts should have been undertaken in conjunction, providing companies with fewer risks when employing people on a long-term basis.

For job creation in France to undergo meaningful improvement, unions must not be allowed to derail reforms as they have successfully done so to previous attempts – most notably those of Hollande and Mitterrand. Labor laws have deterred job creation for longer than most care to remember, but so far the extent of discord among unions appears to be limited to the most militant. The degree of anticipated disruption on Parisian streets predicted to occur during September should not deter those in favor of reform.

 

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