Thursday, August 31, 2017

Has Macron Sliced the Gordian Knot?

Emmanuel Macron badly needs a win. I think he may have it. His labor code reform is out, and there has been no earthquake. It seems unlikely there will be. I'm working on a longish magazine article, but here is my initial reaction:

Today, the details of the reform proposal were finally released. A key provision was a reduction of the maximum indemnity available to employees deemed by a review panel to have been fired without cause. In return, labor received a sweetener: an increase of 25 percent in the compensation due to employees judged to have been laid off for legitimate economic reasons. But, to the unions’ displeasure, employers can now claim to be in economic difficulty if a plant in France is unprofitable, notwithstanding profitable operations outside France. The unions are also unhappy with a provision allowing small firms more room to negotiate with workers directly, without the presence of a union representative.
 On the other hand, the government offered a number of new benefits designed to win union support, including a training allowance for union members who wish to expand their skills and a new office to ensure that companies do not violate rules governing collective bargaining.
 The olive branch extended to the unions may prove effective. Force Ouvrière, the third largest union in France, has announced that it will not participate in the general strike called by the second largest union, the CGT, for September 12. Since FO had been one of the most vociferous opponents of a previous labor code reform, this is a sign that Macron may have sliced the Gordian knot of labor code reform. The country’s largest union, the CFDT, has long been more receptive to liberalization of the labor laws than its two rivals and had already refused to join the CGT. But CFDT leader Laurent Berger said[ that he was disappointed by the provision narrowing the definition of economic difficulty to operations within French borders. He nevertheless characterized other provisions of the reform as “productive” and “intelligent.” He also indicated that the government had withdrawn certain proposals in response to union objections and said that the final result was not “the destruction of the labor code that some critics have proclaimed.”
 As is often the case in French politics, the symbolism of the reform has come to overshadow the substance. The measure is widely seen as a test of Macron’s strength and resolve. Proponents make the exaggerated claim that persistent high unemployment in France is due primarily to labor-market rigidity, which the reform will fix once and for all. Opponents, led by the fiery orator Jean-Luc Mélenchon of France Insoumise and the mustachioed union boss Philippe Martinez, hope to gin up the fervor of their troops by presenting the measure as an all-out assault on the anti-neoliberal resistance (although Martinez did not refrain from participating in negotiations to obtain a better deal for his members, he did not back down from his call for a general strike after the results were announced). While the clash will be dramatized for maximum political effect on both sides, the outcome looks more like an incremental shift toward lighter labor-market regulation rather than a wholesale jettisoning of France’s byzantine labor code.

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bernard said...

I think you have it just about right, with one small caveat: proponents certainly do not all make the exagerated claim that rigidities are the number one cause for high unemployment in France. I listened to Philippe's interview on FR2 yesterday evening and he specifically said that he did not believe so, but that it was indeed one factor among others contributing. He went on to say that it was important to attack all factors contributing.

Unknown said...

Yes, I heard Penicaud say the same thing this morning, in almost identical words, as though this were an agreed talking point designed to ward off the anticipated criticism. Very intelligent, like the whole ensemble. There really is very little to object to in the package if one is not dead set against all labor market experimentation.

Robinson said...

The package seems both good in itself and well enough designed that it will survive parliament and street protests. It is rather modest to be the centerpiece of Macron's agenda, however. I don't really mind Macron thinking small, but one presumes that the Germans will be unimpressed.

Anonymous said...

Agree that Macron used a scalpel not a cleaver. On both sides of the Atlantic, then, leaders have Overpromised and Underdelivered, the opposite of what businessmen are taught to do. Perhaps it was always going to be just a show for Schauble's benefit. But what does this plan do for the Youth, who I think are more the swing vote than people think?

Is "Modestly Jupiterian" an oxymoron?

Bernard said...

The Youth in France and elsewhere are not the swing vote since they hardly ever bother to exercise their right to vote.

Anonymous said...

@Bernard: That's exactly what Theresa May said before the June election. (And when no one else could, it was the students who got rid of even DeGaulle.)

Anonymous said...

I tend to think that *all* of France's recent leaders have been right about how the Eurozone ought to evolve. Sarkozy, Hollande and the new fellow have all thought the same thing, and even Chirac and Jospin were not so far off either. It is Mitterrand who assented to the current structure of the Eurozone. He and Kohl deserve the blame, and Mitterrand far more than Kohl. Kohl got German unity in exchange for the Euro, Mitterrand got nothing.

Since Sarkozy at lest the French have known that, given the structure of the Eurozone, Germany must be persuaded to be more fiscally generous to its European partners. Germany won't, so France must coax and threaten. Sarkozy did a marginally better job at this than Hollande. One hopes that Macron will do better still, but this mite-sized reform won't make much difference one way or another. The power of decision will rest with Merkel in Berlin.

Robinson said...

@Anonymous- There's some truth to what you say about Germany's power over France and the Eurozone- I said something similar in my own comment above. However, France still has some power over its own destiny, and the new labor law proposals deserve to be evaluated on their own merits and not simply as a sop to Germany. They are reasonable, cleverly designed and large enough to have a good effect on the French economy in the medium term. They are not a French Hartz IV: France neither wants nor needs that sort of destructive reform, and it would be folly to try to destroy the French social model in a vain attempt to impress the Germans.