Marchons Macron!
France is nominally secular, but just like Britain and #ourNHS the French have a state religion - its famously strict labour market. Gallic politicians of left and right are cursed the second they touch the subject of reforms but it looks possible that is about to be confounded. President Macron won his landslide victory earlier this year while advocating far-reaching reforms of labour laws, against the protectionist and dirigiste Mme Le Pen. And on Tuesday the Assemblie Nationale voted through a bill allowing the government to fast-track changes to the labour code.
High mandatory wages mean that some workers are simply cut out of the market - for some the first rung of the labour ladder is out of reach. Controlling how long people can work means either controlling how long someone can get wages from an employer or imposing severe costs on employers looking for workers. High severance costs make taking on a new employee a risky choice. All of this hits the low-skilled, young, ethnic minorities and people from deprived backgrounds the hardest.
Introducing greater flexibility over hiring and firing, of severance pay, and around maximum working times would - as it did in Germany and Portugal - help boost growth and ensure employment is buoyant through and after negative economic shocks. One of France’s most famous regulations is the 35-hour working week. While the lower working hours can be matched with labour productivity gains we also see persistent high unemployment as firms maintain production levels instead of raising them. This, coupled with heavy-handed employment protection legislation, that causes a double-whammy of rising hiring and firing costs, is crippling France’s long-term economic growth prospects.
Macron knows the long-term destabilising effect of high unemployment - currently sitting at 9.4% - and wants to ensure that France avoids any further brain drain while driving up France’s sclerotic economic growth rate. Nearly 60% of French nationals that study PhDs abroad no longer return home, with one in three in either the USA or the UK.
And it looks like Macron's hopes for a growing France might just happen. Pôle Emploi’s annual survey found hiring intentions were up 8.2% with the construction industry’s up by 22.5% after years of falling. Macron is right to make job creation his top priority and pledge to cut unemployment to 7% within five years. The growth rate looks like it is on the up too. France is projected to rise from a meagre 1.2% in 2016 to 1.4% this year and up to 1.7% the next.
But we shouldn’t kid ourselves that Macron is going to have an easy ride. Reform means change and change is nearly always resisted. Macron encountered this before when he was the Minister of Economy and Finance under the socialist government of Prime Minister Valls and President Francois Hollande. Already the CGT, a hardline union with 710,000 members in key infrastructure roles, has called a nation-wide strike on 12th September.
The CGT might be the only union so far to turn its sights on Macron and La République En Marche! (LEM) but it is unlikely to be the last. Jean-Luc Melenchon, who secured nearly 20% in the first-round of the Presidential vote, has recently called for people to ‘resist’ the reforms. As Macron falls from the highs of his honeymoon popularity other opponents of his reform agenda will decide to put their heads above the parapet.
Yet opposition doesn’t mean that Macron’s legislative package will be scuppered. Even without his majority in the House of Deputies the President has form in ensuring he gets his laws implemented.
In 2015 the so-called Macron Law was introduced to significantly expand the potential use of Accords de Maintien de l’Emploi to get around the Republic’s strict adherence to the 35-hour working week. This led to the invocation of Article 49-3, a mechanism by which the government can force through legislation. Usually this leads to a ‘motion de censure’ which creates a vote akin to our own votes of confidence. Rebels have to decide if they back their position to the hilt, and, those that might abstain are suddenly drawn to make a decision.
In the end the confidence motion passed. Looking at what Macron said at that time, maybe we should have known he was destined to split from his Socialist Party, set up a new movement, and win the presidency: “Is it democratic to keep procrastinating?” Macron said. “There is a moment when you have to act.”
Well, quite. And his actions so far suggest that he’s serious about getting to grips with the bureaucratic nightmare that is France’s labour code. It will be good for France’s economy, it will help us if our nearest neighbour is growing strongly and we can trade more with them. Importantly it will also help us all if it can be shown again that liberal labour markets help everyone become better off because we’ll be able to convince more people and markets of the need to reform.
Marchons Macron!