France faces pres­sure to loosen la­bor laws

Kuwait Times - - BUSINESS -

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

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