French Jobless Benefits on the Block in Macron’s Next Reform

(Bloomberg) --

Emmanuel Macron is taking aim at French unemployment benefits, sparking the wrath of the country’s labor unions just as the Yellow Vest protests subside.

The president is pushing through the last phase of his overhaul of France’s labor market after easing restrictions on hiring and firing in 2017 and boosting training programs in 2018. The new measures, which include financial penalties for companies and cuts to welfare checks, aim to deliver 3.4 billion euros ($3.8 billion) of savings and cut unemployment by at least 150,000 in the next three years, Prime Minister Edouard Philippe said.

“I’m convinced this will combat mass unemployment,” Philippe said. “Our aim is to end an illusory security.”

Macron’s confrontational move, which will be delivered by decree, is a particular affront to businesses and unions who have for years managed the generous unemployment system independently. As Philippe explained the overhaul, union leaders lined up in the courtyard of the prime minister’s residence to express their opposition.

“This is a huge loss for job seekers,” Laurent Berger, the head of moderate union CFDT said. “The CFDT is extremely angry.”

Tensions between unions and the government were already running high after efforts to negotiate a settlement broke down in February, prompting the administration to act unilaterally.

The plan would extend the period people have to work before being eligible for aid, cut checks for high-income individuals, ensure working pays more than claiming benefits, and penalize companies that repeatedly use short-term contracts. The changes will bring France more into line with countries like Germany and Spain, which have already revamped their labor markets.

Small business union CPME said the changes will do little to boost employment and will effectively raise taxes on companies. France’s largest business lobby Medef said the penalties for short-term contracts would be counterproductive.

“The reality is that it will either be ineffective or discourage employment,” Medef leader Geoffroy Roux de Bezieux said.

Unemployment in the euro area’s second-largest economy fell to 8.7% in the first quarter of the year, its lowest level in a decade. Macron aims to bring it down to 7% by the end of his term in 2022.

A prolonged downturn in the labor market has burdened the benefit system with 35 billion euros of debt.

To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net;William Horobin in Paris at whorobin@bloomberg.net;Gregory Viscusi in Paris at gviscusi@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Jerrold Colten

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