France faces pressure to loosen labor laws
PARIS: Pressure is mounting on the French government to reform strict labor laws as evidence suggests they are deterring companies from hiring full-time staff and could act as a brake on the country’s sluggish economic recovery. It can be extremely difficult to dismiss permanent workers in France - the process can take years as companies must take cases through labor courts, and often involves compensation payouts. Four out of five new hires in the country this year have been on short-term contracts.
Such temporary status is a drag on worker motivation and company productivity, according to Stefano Scarpetta, director of employment, labor and social affairs at the Paris-based Organization for Economic Co-operation and Development (OECD). It needlessly increases employee turnover and reduces the incentive to invest in training, he said.
When 24-year-old Marine from Marseille landed a job at a big cosmetics company in Paris last year, she thought she had made it. But on arriving, her employer was unwilling to give her a permanent job - and the risk of the one-year contract she got instead made landlords unwilling to rent her a flat. In the end, she used a forged ID to pretend she was a student and, with her parents as guarantors, found a studio in the Paris suburb of Levallois.
“I don’t even feel guilty because I pay my rent, and I know there will never be a problem for that,” said Marine, who did not want her surname published because of her rental situation.
Her fixed-term contract is called a CDD - Contrat ‡ DurÈe DÈterminÈe. She would prefer to have a CDI, or Contrat ‡ DurÈe IndÈterminÈe - a full-time job. In 1982, 95 percent of the French workforce had a CDI. By 2012 it was only 86.5 percent, and for the under25s, 48 percent.
The OECD’s Scarpetta said southern European countries whose labour market rigidity was dragging on economic growth had made reforms to address the issue. “Now it’s up to France to see whether it wants to follow, because the risk is that they are the one lagging behind.”
The inflexibility of France’s labor market is one factor capping the country’s growth at 1.5 percent over the medium term, debt rating agency Moody’s said in its decision to downgrade France in September. French unions and leftist politicians, however, say moves to loosen labor rules have increased poverty and inequality in countries like Germany and Britain, simply creating more low-paid, part-time jobs as well as “zero-hour contracts” where an employer has no obligation to provide any work.
ITALY, SPAIN In Italy, the government earlier this year eased firing restrictions for large firms earlier this year, introduced an open-ended contract in which rights gradually increase with seniority and offered temporary tax breaks for companies that hire workers on permanent contracts.
Although it is still early days, the first batch of data seems promising. The share of new hires on temporary contracts dropped to 67.8 percent in Italy in the second quarter, from 68.6 percent a year ago. In France, by contrast, the latest data available show an increase in new hires on CDD contracts, to 85.3 percent in the first quarter from 84.4 percent over the same period a year ago.
Italian trade unions and other critics, however, say firms in the country are simply taking advantage of the temporary tax breaks, and question whether the trend will continue. Successive Spanish governments have also changed laws in the past five years to reduce the cost of firing employees on permanent contracts, depending on the economic circumstances of the company - and the labor issue will be a central one in a general election next month. —Reuters