By Edward Richter
Since his election, French President Emmanuel Macron has embarked on an ambitious plan: to reform not only France’s economy, but indeed the social underpinning of the nation itself as he seeks to reform the nation along Nordic lines. In doing this Macron has drawn praise from businesses and scorn from Unions who see his actions as condemning the French people to the mercies of the Anglo-American economic model. Whether Macron’s proposed legal reforms will follow the Nordic model as he says they will, or follow the Anglo-American model as his detractors claim, is at this point uncertain. However, by analyzing and comparing the underlying legal, social, and economic constructs of France and the Nordic countries, it appears that Macron’s current plans may be unviable.
Synopsis of French Labor Law:
The French labor market has been highly regulated since the 19th century with companies’ ability to hire, fire, and manage employees being regulated at the national level through the voluminous, complex, and opaque Code du Travail. The Code du Travail has been blamed for France’s high unemployment rates as it imposes considerable costs to hire and fire employees. The result has been a highly static labor market that ensures excellent security for those with jobs, but makes it difficult for many people to get jobs.
Synopsis of the Reforms:
The crux of Macron’s proposed changes is a two-pronged reformation of France’s labor laws by first overhauling the Code du Travail, and then restructuring France’s existing social safety net into something closer to the Nordic Flexicurity model. Macron has already made progress overhauling the Code du Travail as the Parliament has voted to let him pass the reforms by ordinance, meaning he only needs the Administrative High Court’s assent for the changes to become law.
The first of the core changes that Macron has proposed is to place more emphasis on in-house labor talks as opposed to sector-level discussions in the hope that this will provide companies with greater flexibility during a downturn by allowing each one to negotiate a deal that fits their situation. The second major change is that when assessing the legality of a layoff plan, French judges can only look at the health of the company inside France rather than internationally. The third proposed change is that there shall be a predetermined scale for damages in wrongful dismissal actions which should make the cost of such actions more consistent for businesses. The fourth change is that the works, health, and safety councils that are needed for all companies with more than fifty employees shall be combined into one. The fifth major change is that the length and renewal terms of short term employment contracts will be decided on the industry rather than national level, which will give companies more flexibility in hiring short term workers. The result of these changes is that it will be easier to hire and fire workers, which should result in more people employed but lower quality jobs with less security.
However, there has been relatively little movement to enact the reforms of the French social safety net to bring it in line with the Nordic model as Macron has said he intended to do. Indeed, the only real movement on this matter is that the minimum damages awarded for a wrongful dismal are to be increased, a far cry from the extensive safety net present in the Nordic countries. As such, any analysis of the impact of the second prong of Macron’s plan is premature, until he implements it, or it is revealed that there will be no implementation of it whatsoever.
Comparison and Analysis:
Macron’s claim that he is trying to create a Nordic style Flexicurity model is questionable. This is because while the Nordic countries do not have as many restrictions on businesses, the potential negatives of said lack of restrictions is balanced out by a generous social safety net. This safety net means people are essentially free to leave their jobs in search of ones that are a better fit for them or to pursue other endeavors, subject to a few restrictions. The French safety net meanwhile is less substantial in terms of the support it provides the unemployed in favor of ensuring greater protections and benefits for the employed. As such, without the implementation of the second prong of Macron’s plan, any hope of moving France to the Nordic model is fanciful.
Furthermore, whether the second prong can be implemented is questionable. This is because Macron’s goal of expanding the social safety net may come into conflict with Macron’s foreign policy goal of strengthening the E.U., which involves complying with the E.U.’s limits on public debt. This limits Macron’s ability to spend money on the social safety net, as he needs to cut spending. As such,it is highly questionable how Macron would be able to accomplish the second prong of his plan.
More concerning is the possibility that even if the second prong is implemented France’s social conditions may be too divergent from the Nordic countries for their model to be viable. This is due in large part to differences in how France and the Nordic countries’ unions and businesses interact. Notably in the Nordic countries unions and the companies whose workers they represent have a largely functional working relationship which keeps wages to levels business can support to ensure businesses profit and hence higher more people. However, in France strikes and conflict between unions and businesses are endemic and so relations are fraught with tension, which may make it impossible for France to achieve the sort of trust that enables an equitable balance between business and unions.
The result of the likely failure of the second prong of the plan is not exactly clear, but considering France’s existing social safety net it seems unlikely that France will end up like the Anglo-American countries with low unemployment but shrinking real wages. Instead, France may instead end up like Germany with low unemployment but a proliferation of short-term and part-time jobs in place of careers.
Macron’s goal of shifting France onto the Nordic model by reforming French labor law and expanding the social safety net to enable more fluid movement of labor is laudable. However, difficulties are posed by his competing foreign policy objectives and the tense relationship between labor and management in France. While France’s safety net will probably prevent disastrous results like in the Anglo-American countries, the result will likely see a proliferation of short-term and part-time jobs like Germany.
Authors Note: I would like to thank Professor Marie Mercat-Bruns of the Universities of Sciences Po Law School and the Conservatoire National des Arts et Métiers for her help in putting this essay together. Her most recent book Discrimination at Work compares anti-discrimination law in France, Europe, and America and is available free through Luminos the University of California Press’s open access publishing service.