Government initiatives to benefit low-paid workers and SMEs

Following a government seminar at the end of August 2006, the French prime minister outlined measures, including some new initiatives, which the government is planning to implement in the coming months. The measures concern a range of different areas including social dialogue, employment and improving the purchasing power of low-wage earners.

On 31 August 2006, Prime Minister Dominique de Villepin organised a government seminar (in French) in Troyes in the northeast of France. On foot of the seminar, the government revealed the various measures planned in relation to the following areas:

• employment – in the framework of the third phase of the emergency employment plan (FR0507103F, FR0605059I) and on the basis of the most recent unemployment figures (in French, 34Kb PDF), which have continued to fall (FR0608029I), dropping to 8.8% in September, measured according to the International Labour Organisation (ILO) method and seasonally adjusted;

• purchasing power – providing employment tax credit (formerly referred to as ‘employment bonus’) for low-paid workers (Prime pour l’emploi, PPE) (FR0409104F) and offering other tax benefits such as transport vouchers;

• supporting small and medium-sized enterprises (SMEs) to increase their growth potential;

• reform of social dialogue.

Measures promoting employment

Prime Minister Villepin announced a total of five measures aimed at promoting employment, and underlined that ‘savings and regained growth’ would help to finance these measures. They will be implemented between now and the end of 2007 and are directed at two main target groups:

Young people

• those who are on an ‘integration into society contract’ (Contrat d’insertion dans la vie sociale, CIVIS) (FR0605059I) will benefit from ‘support for preparing their way to recruitment’, provided through an agreement between the young person, the company and the National Employment Agency (Agence nationale pour l’emploi, ANPE). The beneficiaries, who will have the same status as those on CIVIS placements, will receive 450 hours of vocational training and will be paid by the state. Payment will amount to €352 per month for those under 26 years of age and to €650 per month for those aged 26 years or older. Companies will receive €1,350 to cover the training costs. The government envisages the signing of 50,000 such agreements before the end of 2007;

• the ‘programme for accessing economic activity’ (Programme d’accès à la vie active, PAVA), which was adopted in the spring of 2006 (FR0605059I), will be continued and the government expects to involve another 50,000 young people;

• in ‘sensitive high-risk urban areas’ (Zones urbaines sensibles, ZUS), a bonus of €1,000 will be awarded to companies and public authorities that recruit young graduates from these neighbourhoods. The graduates will benefit from the support of a recruitment agency. Along with the 5,000 young people who are currently beneficiaries of this programme, the government has announced 15,000 new places. Beneficiaries will also be able to make use of a new high-quality label concerning ‘diversity and geographic equity’, which should be taken into account in future recruitment.

People over 50 years of age, who have been in receipt of the Specific Solidarity Allowance (Allocation spécifique de solidarité, ASS) (FR0409104F) for more than two years:

• will benefit from assistance, similar to the CIVIS initiative for young people, in the form of ‘training to adapt to a job, which has been identified by a company or the ANPE’;

• will be able to sign a ‘contract for the future’ (Contrat d’avenir), which is totally financed by the state in the form of a ‘social cohesion bonus’ for companies. They will also receive individual assistance in their job-seeking efforts or for the purposes of a business start-up.

Measures to improve purchasing power

On 1 January 2007 – following the adoption of the autumn 2006 budget according to the new Framework Law on Budgets (Loi organique relative aux lois de finances, LOLF) – the PPE will be increased to €940 per month (compared with €714 in 2006). This increase will be ‘the equivalent of a thirteenth month’ for some nine million beneficiaries who are in full-time employment and earning the national minimum wage (Salaire minimum interprofessionnel de croissance, SMIC) (FR0607019I).

Moreover, the law on developing participation and employee shareholding, which parliament was to adopt this autumn, is due to introduce the following new measures:

• a ‘work dividend’, which will take the form of profit sharing or free shares for employees;

• ‘transport vouchers’ (Chèque transport), along the same lines as luncheon vouchers. The voucher will enable employers to contribute up to 50% of collective transport fares or €100 for petrol, which will be exempt from social security and tax contributions. Transport vouchers will be optional for all companies, except those in the:

• Paris region, where a similar measure already exists, obliging employers to contribute up to 50% of collective transport fares;

• public service, from January 2007, arising from consultations with the unions.

Measures for SMEs

On 1 January 2007 – on the basis of a report by the prime minister’s Economic Analysis Council (Conseil d’Analyse Economique, CAE), entitled ‘A SME strategy for France’ – the government is set to create the status of a ‘company that promotes growth’ (Statut de l’entreprise de croissance). The aim of this measure is to make ‘an additional effort for medium-sized companies (between 20 and 500 employees)’ through:

• a reduction in the cost of administrative formalities;

• a tax freeze for high-growth companies over two consecutive years;

• postponement of employers’ social security contribution payments for the most recent recruits.

On 1 July 2007, the government also plans to abolish remaining employer social security contributions (2.1%) for employees earning the SMIC in companies with less than 20 employees. This measure aims to ‘reduce contributions, especially concerning low-paid employees and thus promote job creation’.

Social dialogue reform

The government has defined three aspects of social dialogue reform, which are currently being examined and which are in line with the recommendations of the Chertier report (FR0606049I). In accordance with this measure, the government aims to:

• draw up an agenda for reform, which the social partners will be informed about;

• organise a procedure of ‘prior consultation’;

• create a Council for Social Dialogue (Conseil du dialogue social).

At the end of September 2006 – following consultations with the employer organisations and unions – a draft bill was due to be presented to the National Collective Bargaining Commission (Commission nationale de la négotiation collective).

Reactions to main measures

Employer organisations welcomed the government’s announcement that it was to abolish all employers’ contributions for employees earning the minimum wage in companies with less than 20 employees. Laurence Parisot, President of the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF) commented: ‘helping very small companies can only have a positive effect, because they create the most jobs’.

However, MEDEF considers that the introduction of transport vouchers is not ‘a measure which is a real response to energy problems’. The General Confederation of Small and Medium-sized Enterprises (Confédération générale des petites et moyennes entreprises, CGPME) referred to the fact that the vouchers are optional and that there are no new compulsory costs for SMEs, adding that this has helped to allay some of their concerns with regard to this measure.

Trade unions have all strongly criticised the new social contribution exemptions, in particular fearing the harmful effects of ‘low-pay traps’, increased inequality and more people earning the minimum wage. Moreover, although transport vouchers partially meet union demands, the trade unions are critical of the fact that the vouchers are optional, preferring instead general measures for all employees.

Benoît Robin, Institute for Economic and Social Research (IRES)