A New Way to Work Could Revitalize the French Economy

(Bloomberg View) -- President Emmanuel Macron has finally entered the crucible. At last, he has introduced his bill to reform French labor markets, which might prove the most important act of his presidency both politically and economically.

Most of the commentary has focused on the provisions that tackle some of the more egregious red tape in this famously worker-friendly economy. For instance, each business now must have three workers’ councils; under the reform, those would be merged into one.

But one provision, which has received much less attention than those small bureaucratic reforms, might have the biggest impact.

One fundamental problem with the French labor market is that it is split in two tiers: highly secure contracts with many benefits that are expensive for employers to break, known as contrat à durée indéterminée, and fixed-term contracts, which last at most 18 months, known as contrat à durée déterminée. To work on the indefinite contract, or CDI, not only provides benefits, but also is a badge of economic security. It is all but required to secure private housing and credit. But because those contracts are so hard to break, employers are loath to grant them -- leading to a two-tiered society. Workers on the finite contracts end up as a kind of lumpenproletariat, bouncing from job to job without security.

But there is another type of contract, known as the CDI de projet, which is a hybrid of the two. At the moment such employment terms are allowed only in the construction industry. Macron's bill would allow CDIs de projet in all sectors.

This project-based CDI is as the name suggests: a contract that does not have a fixed term but still has a baked-in termination clause -- the end of whatever project the employee has been hired to work on. Employers like it because it is flexible and reduces their risk of being stuck with more employees than they need (or facing a wrongful termination award from France’s notoriously anti-employer courts). Employees might still like these terms because even though it is not completely open-ended, they still have some security and benefits during the contract. Before a competent employee can be let go at the end of the project, the employer must make a good-faith effort to find them an open-ended job within the company.

Employers have long sought such a device. Medef, France’s largest industry group, first lobbied for it in 2000, the French daily Libération reported. Representatives pushed for it during previous rounds of labor-market reform in 2013 and 2015, but the provision was dropped because of union opposition, according to France Info.

The project-based CDI seems a ready-made answer to the central question when it comes to the French labor market: how to bridge those two tiers. Employers have a legitimate need for flexibility and an understandable reluctance to take on an unproven applicant in a secure contract. And yet workers legitimately aspire for some economic and legal security.

There’s a possibility for the project-based CDI to become that bridge. It can allow employers and employees to try each other out, for prospective long-term employees to prove themselves on a project without having the stigma of a fixed-term contract in the meantime.

Macron and his supporters are not trumpeting their bid to expand the project-based CDI, and few observers seem to have noticed it. But it could prove the most transformative element of their reform.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Pascal-Emmanuel Gobry is a Paris-based writer and fellow at the Ethics and Public Policy Center.

To contact the author of this story: Pascal-Emmanuel Gobry at peg@peg.im.

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