France Cuts Hours to Make Jobs

National Assembly approved 35-hour work-week Feb 10, but employers question plan.

France took a controversial turn in the battle against European unemployment Feb. 10, approving the shortest workweek in the world and urging entrepreneurs to create new jobs to make up for the lost hours.

The Socialist government's sizable majority in the lower house National Assembly ensured victory for its plan to cut the legal workweek from 39 hours to 35, an election campaign promise that had enjoyed support from trade unions and among the public.

Business leaders, however, and most international economic analysts, are skeptical about the proposal. They agree with free marketeer Alain Madelin, a deputy in parliament, who argued that "when you are in trouble, it is not by working less that you get out of it."

A pressing problem

Unemployment, at just over 12 percent, is France's most difficult and most intractable problem, and respectable economic growth has done nothing to dent it. Governments of both the left and the right have failed to curb joblessness, and Prime Minister Lionel Jospin's new initiative is something of a last-ditch effort to make labor market regulation work.

Under the law, which must still be ratified by the Senate, privately owned companies with more than 20 employees must cut the workweek to 35 hours by Jan. 1, 2000.

Smaller firms will have another two years in which to make the change. Between now and then, managers and workers will negotiate, company by company, how the cuts are applied, and whether wages will be reduced or frozen.

Firms will be encouraged by state subsidies to hire new workers - employers will be excused from paying more than half of France's traditionally heavy social security contributions for each new job.

The hope is that if more people are employed and consumption goes up, the higher tax revenues that result will more than pay for the subsidies.

But not everyone is convinced by the government's somewhat mechanical reasoning, that if you cut working hours by 11 percent, you can create 11 percent more jobs.

Job forecasts differ

Economic forecasts by the Bank of France and private think tanks vary widely about the impact of the law: One optimistically predicts the creation of 700,000 jobs, while at the other end of the spectrum, the National Confederation of French Employers has warned that the law will destroy more jobs than it creates.

Employers complain that the real brake on job creation is the high level of social security contributions they must pay for each worker, and the strict laws about firing employees that make them hesitate to hire any.

This echoes the argument of entrepreneurs in neighboring Germany, where unemployment has been climbing relentlessly toward the psychologically critical 5 million level, and in Italy, where the government is also considering shortening the workweek as a way to combat joblessness.

Much of German industry has already gone to a 35-hour workweek voluntarily, but the country's influential trade unions and the German tradition of taking care of the citizenry have made sure that wages stay high.

That, say employers, has contributed to the growing problem that German industry is facing as it struggles to stay competitive in world markets.