Labor reform and the potential political crisis in France

Labor reform and the potential political crisis in France

The cacophonic debate over the recently presented labor reform raises wonders about President Hollande’s strategy for the upcoming presidential campaign. The bill is just the preview of a stretch that could cost his government and political party a nervous breakdown.

Reforming the labor market is part of the policies Brussels has consistently asked Paris to implement in order to tackle the country’s structural economic imbalances. However, in France, attempts to review the way French businesses handle their workforce are traditionally prone to deep social divisions resulting in protests.

More than just a battle, the passing of the government’s reforms could well trigger a political crisis both for the cabinet and ruling Socialist party. This prospect is particularly surprising for a package of measures that received widespread support from the French economic sector.

However, that was before the detailed reforms were made public, and the rigid French political ideologies took control of the debate.

A burning issue

Labor reforms have been a puzzle causing several crises in French politics in the past decades, often representing one of the main fault lines between the left and right tendencies of the political spectrum.

Since the 35hrs/week Law was passed by Socialist Martine Aubry in 2000, conservative governments have struggled to add flexibility to the system. Street protests successfully blocked several attempts, including the “CPE” law in 2006, which aimed at improving young worker’s integration into the labor market.

Nicolas Sarkozy managed to water down the 35hr law in 2007, when he introduced a bill exempting extra hours from taxes. However, Hollande repealed the measure when he came to power after defeating his conservative rival in 2012.

















Structural economic imbalances such as a lack of competitiveness and weak growth (for which France was warned by the European Commission on March 9th 2016) and the de-industrialization of some parts of the country are the major strains on job creations in the country.

But data suggest that the right-left divide over working hours which has occupied public debates has missed the point, since the French work 39 hours a week on average (see chart above) ; and the successive withdrawals and unmaking of reforms also triggered a sick job market. With 3.59m unemployed, France has consistently topped the EU average for the past 15 years.









Technical difficulties

The situation seems to require drastic measures to be put in place if Paris hopes to address it effectively. Thereby, President Hollande is trying unusual steps for a Socialist politician: add flexibility for companies in the management of their workforce, with measures that have been called by liberals for years and would, theoretically, reduce constraints for firms willing to hire.

In the initial plan, the first measure insisted on giving more power to unions in negotiating working hours within companies, instead of the current system that gives central unions in Paris the bargaining power with the government. The issue with this German-inspired-system is that French unions are too weak — with only 7% of workers unionized — and ill-equipped to take on the responsibility. Thus the devolution of power requires a revolution of practices in France, along with a change of social dialogue culture from contestation to a synergetic approach.

Another measure that is much contested is a plan to lower existing high barriers to laying off workers, including introducing a cap on awards for unfair dismissal made by labor tribunals. By reducing restraints for firms to lay off workforce, the government hoped to encourage job creations.

Ideological fault line

This last point has electrified the debate, as unions feel that it endangers job security and the French social heritage. The bill has awakened an ideological fault line within the French society, with traditional leftists promoting this social heritage progress at any cost, faced with liberal conservatives that look at neighboring countries to find inspiration in more flexible schemes in order to improve the job market.

A first paradoxical element of the debate is that it is the young French that form one of the most influential protest groups since strikes started on 9 March, even as the reforms theoretically would improve their prospect to enter the job market.

A second is that the traditional ideological fault line has now shifted to the left. Hollande is trying to reverse the job market trend, a condition he has claimed would trigger his running for a second term. After implementing limited measures in January — including 500 millions in spending to train unqualified jobless French — the President is taking a chance with some liberal medicine, influenced by his Prime Minister and Economy Minister Emmanuel Macron, both controversial figures in the Socialist Party.

Beaten up government

Aubry, who recently emerged as the latest spearhead of the traditional socialists, has voiced direct opposition to Macron and the liberal policies included in the reform. A new rebellion within the Socialist Party — and their coalition partner the Greens — seemed inevitable on the bill. And in fact, since introducing the first draft, the government has been forced to back down on the most controversial measures, and the continued opposition threatens to kill the bill once and for all.

After Hollande was compelled to retreat on his constitutional reform, which would have introduced a plan to strip terrorist of the French nationality, the government will probably experience its second defeat in just a few weeks, or it would risk losing its parliamentary majority and marginalizing part of the leftist electorate.

While Hollande is not expected to introduce many more measures before the kick-off of the campaign, the second risk holds much more meaning for the leader, and forcing the bill through Parliament with the controversial 49-3 decree — used last year to adopt economic reforms — would be too damaging.

The battle for the left

Primaries have never been held in French politics for an incumbent candidate. But Hollande’s pledge to run only if job figures reverse is putting him under increased pressure.

If he is to run without a primary, Hollande will not be able to count on radical voters’ support –who will likely chose radical leftist and anti-austerity Jean-Luc Mélenchon. Hence his moving to the center with liberal policies, which is a direct attempt to weaken centrist opponents such as the very popular Alain Juppé who will run in the LR primaries, possibly against Sarkozy — who has not confirmed his candidacy yet.

In the case of Socialist Primaries including Hollande, his centrist position promises a fierce debate with radicals and old rebels who left his government after the political shift. And in the case Hollande would not be candidate, Manuel Valls would probably take his place in the debate.

Whatever the actual casting, those primaries would be necessary to offer a real debate and intent to unite leftist voters behind one candidate with the ability to qualify for the run-off.

The current strategy followed by Hollande is likely to trigger the rise of the anti-establishment the National Front. By blurring the differences between the SP and LR, Hollande gives credit to Marine Le Pen’s message that both parties are the same and her own is indeed the only true alternative.


Categories: Europe, Politics

About Author

Julien Freund

Julien is an analyst with a focus on Europe. He has worked as a lobbyist in Paris and Brussels and has written extensively on the rise of nationalist parties. He holds two master's degrees in geopolitics and international relations and in European relations, and received his BA in economics and social sciences from the Catholic Institute of Paris.