Sunday, September 27, 2020

France Overhauls Labor Laws Giving More Flexibility To Companies But Little Security For Workers

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Just weeks after new labor laws in France came into effect several companies have taken advantage of it and announced downsizing of varying levels:

  • Around 1,300 job cuts announced at France’s biggest automaker
  • At least 2,500 proposed at France’s largest supermarket chain
  • Nearly 200 proposed at a major clothing retailer

However complementary measures for cushioning the blow like retraining programs are yet to be put in place, leaving workers vulnerable to further waves of downsizing.

New Rules Part of Efforts To Revive French Economy

The changes are part of a broad push by President Emmanuel Macron to revive growth and shift France towards a Scandinavian-style economic model known as “flexible security.”

But in the initial days, the imbalance between employers’ rights and workers’ protections could mean that the country’s economy may get worse before getting better.

Unemployment, which has been at around 9 percent for nearly a decade, could rise in the coming months, and unions, already resisting the overhaul, may become impatient if the government fails to follow through on its promises to workers.

Jean-Paul Fitoussi, an economics professor at the Institut d’Etudes Politiques de Paris pointed out that currently it was “flexibility and no security.”

New Laws Reigniting Investor Interest In France

Growth in France has recently picked up after being stagnant for nearly five years, and with the recent policy changes there has been a revival of investor interest :

  • Amazon has announced plans to open a new distribution center near Paris, creating over 1,000 jobs.
  • Facebook and Google are planning on investing in artificial intelligence development in France.
  • Toyota has announced plans to invest 300 million euros, or $367 million, to hike the capacity of its plant in northern France, creating up to 700 jobs through 2020.

Olivier Marchal, the chairman of Bain & Company France, a business consulting firm noted that “complex labor laws” have been “historically the No. 1 obstacle” to the attractiveness of France.

The changes made to labour law , as well as other business-friendly measures such as a gradual reduction in the corporate tax, have “drastically changed investor perceptions,” Marchal said.

Funding For Proposed Worker Programs Stalled

Macron is looking to invest more than €15 million in programs to improve public and private retraining but lawmakers are not willing vote on the measures until the spring.

Additionally, any improvements from the retraining programs will take months, if not years, to bear fruit.

For unions, the worry is that the changes are a ploy to strip away worker protections as well as their own power. In past few weeks, several of the country’s trade organizations have been vigorously opposing the changes, but with limited results.

Companies Gain More Power

With the new rules the balance of power has moved from workers to employers. Businesses were so far reluctant to hire as it was difficult to remove workers so they preferred precarious short-term contracts to fill the gaps.

Now, companies can negotiate job cuts and restructurings through voluntary departures directly with labor representatives inside the business, rather than under strict industrywide collective bargaining agreements.

Philippe Martinez, the secretary general of the General Confederation of Labor, opined that the changes are a method for companies “to get rid of low-cost employees with seniority”, who are “considered too highly paid”, and for “recruiting precarious and disposable workers” in their place.

These new rules may also pit labor groups against one another. The more moderate French Democratic Confederation of Labor  is pushing for a more flexible approach given that the forces of globalization are changing the competitive landscape.

More Pressure Likely In Coming Days

Last week’s announcements of job cuts are likely to be followed by several more which could be a test for Macron. He had campaigned during the presidential election to make France more dynamic, but without unravelling its social welfare model.

Opponents like Marine Le Pen, the leader of the far-right National Front, , who unsuccessfully challenged Macron last year in the presidential runoff, has warned that under the new rules companies may be able to hire and fire more easily, but “human dramas will multiply.”

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