Hollande Chickens Out On Desperately Needed Labor Market Reforms

By Bloomberg

French President Francois Hollande recently came up with some good proposals for reforming the country's notoriously rigid labor laws.Most of them never made it into the bill presented to his cabinet Thursday. It's a lost opportunity his country will have cause to regret.

The original plan, strongly supported by Finance Minister Emmanuel Macron, wouldn't have scrapped the totemic 35-hour workweek law entirely, but it would have made life much easier for France's beleaguered employers -- loosening the rules on working hours, restricting union powers and making it easier for firms to dismiss workers they don't need. Lifting these burdens would have boosted employment and lifted the economy.

The retreat was unnecessary. French voters aren't implacably opposed to economic reform. Macron is the government's most popular politician by far. And ever since Nicolas Sarkozy was elected president in 2007 with a mandate to reform, it's been clear that there's a constituency for change. Yet protests by unions and students were enough to make the government back down.

Sooner or later, these reforms will have to be taken up again. France's unions represent only about 8 percent of the French employees, but their statutory role as co-managers of France's health and social security system, and as representatives of French employees (whether they're union members or not), gives them grossly disproportionate power. Employee layoffs, office moves and all manner of petty management decisions are subject to their review. The current rules bind firms with 50 or more workers: No wonder so many French firmsstop hiring at 49.

Hollande's earlier proposal was moderate, even to a fault. In diluting it almost to nothing, he's denied France its best chance to create jobs and boost growth.

Source: Hollande's Retreat, France's Loss

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