Politics of Reform

T

The massive protests against the law – with one to three million students and workers taking to the streets and occupying half of the country’s universities, including the Sorbonne

– indicate not only the potency of labour issues in France, but also the simmering discontent over the effects of years of high unemployment and sluggish economic growth. The economy grew at 1.4 per cent last year and unemployment reigns at 10 per cent, with youth, in particular, being twice as likely to be out of work. From that perspective, the students’ protests were an expression of resistance to ‘precarite’, or the precariousness that comes with flexible labour contracts and a string of dead end, short-term jobs that dim the prospects of finding permanent employment, earning a stable income or even renting an apartment. At the heart of the battle, according to sections of the media, is the struggle between a French social model and the liberal Anglo-Saxon model. The reality, however, is a little more complicated.

The CPE that sparked off the protests is only one in the growing body of more flexible contracts that are exempt from standard French labour laws and meant to tackle unemployment. More than 15 types of contracts already exist for young people – including temporary contracts and the flexible New Recruitment Contract (CNE) introduced in June 2005 as part of an emergency employment plan – and employers can choose any one from among them. The CPE, which applies to those between 18 and 26 years of age, allows employers the right to terminate the contract within two years, without citing a “genuine and serious cause”, which is mandatory in the unlimited contract. The notice period for termination and severance pay has also been reduced. Part of the problem is that employment prospects cannot be separated from France’s dualistic education system, in which elite institutions or ‘grand ecoles’ churn out highly skilled professionals even as the university system remains poorly staffed and financed and plagued by high dropouts. It is this section of the population, as well as the ‘banlieue’ or underprivileged suburban youth, which the CPE was supposed to assist but was most vociferous in its opposition. In a sense, the government has taken the safer route and attempted to introduce labour reform in a constituency that is the most vulnerable and where it calculated, erroneously, it might hurt the least. It has left untouched, on the other hand, the high degree of protection accorded to permanent employees in France, or according to the Guardian, “prime working age males”, leading to a classic insider-outsider problem. The rigidity of the standard contract prevents expansion of the job market while reforms on the margin penalise young and low-skilled workers.

In Germany, a labour market with one of the highest costs in the world, a large parallel universe of work has developed in which wages are extremely low, benefits few or nonexistent and contracts of a fixed term. Companies have found ways to cut employment costs, enabled in part by erratic labour reforms, while the number who work under the more rigid traditional contract stagnates. France will have to find a way to emerge with a consensus on labour reform if it is to not go down the same path. So far, alternative contracts such as the CNE seem to be simply replacing the standard contract instead of creating more jobs and so the gains on that count seem illusory. The government has decided to replace the law with measures to help poor, unqualified youth to find work, though this will only be a small palliative for France’s increasingly intractable problem. EPW

Economic and Political Weekly April 15, 2006