Social partners oppose proposed funding of 35-hour week

France's second law on the 35-hour working week is due to come into force in January 2000. The government plans to fund part of the reduction of the working week through contributions from the social security and unemployment insurance funds, but the social partners who manage these funds are unanimous in their rejection of this proposal.

Parliamentary debate on the second 35-hour statutory working week bill began on 5 October 1999 and is due to be complete in late December (FR9910197N). The first law on this subject, adopted in June 1998 (FR9806113F), provided for the introduction of a statutory 35-hour week from January 2000 (2002 for smaller companies) and encouraged the social partners to negotiate on this issue before a second law set out more detailed legal provisions (FR9906190F). The new bill sets out all the detailed regulations which will come into effect in 2000 for companies with a workforce of over 20 and in 2002 for the remainder of firms. The crucial issue of funding for the reform will not be debated by parliament, but has been dealt with in:

• the 2000 state Budget estimates;

• the social security finance bill (projet de loi de financement de la sécurité sociale, PLFSS); and

• policy statements by members of the government, such as the Prime Minister, Lionel Jospin, and the Minister for Employment and Solidarity, Martine Aubry.

Funding the implementation of the 35-hour week

For the purpose of the move to the 35-hour working week from the current statutory 39 hours, the government plans a reduction in employers' social security contributions on low-paid jobs - ie those where the pay is up to 1.8 times the SMIC minimum wage, or FRF 12,387 per month - and a permanent contribution reduction for employers of FRF 4,500 per year per worker, for firms covered by a company-level agreement introducing the 35-hour week. This social security contribution exemption will be financed by a newly-created fund known as the "fund for financing reform of employers' social security contributions" (Fonds de financement de la réforme des cotisations patronales de sécurité sociale).

This new fund is projected to spend between FRF 62 billion and FRF 67 billion in 2000, of which FRF 40 billion will finance existing contribution reductions and a further FRF 22 billion to FRF 27 billion will fund the additional relief. However, on 21 September, Ms Aubry indicated to the National Assembly's social affairs committee that between FRF 100 billion and FRF 110 billion per year would be required once the scheme was fully operational.

In 2000, it is planned that the fund will be financed as follows:

• FRF 39.5 billion from tobacco taxes;

• FRF 4.3 billion from a new 3.3% employer contribution levied on the profits of companies with an annual turnover of over FRF 50 million;

• FRF 3.2 billion from an extension of the tax base of the general pollution tax ("Ecotaxe");

• a government contribution of up to FRF 4.3 billion; and

• a "jointly-agreed" contribution from social protection agencies, such as social security and unemployment insurance funds. The actual figures remain to be negotiated, but Ms Aubry has mentioned that the UNEDIC unemployment insurance fund and the social security funds could potentially be required to contribute between FRF 8 billion-FRF 10 billion and FRF 5.5 billion respectively, "to offset the financial benefits [...] from the jobs that will be created".

Jointly-managed unemployment insurance and social security funds

The proposal for financing from social security and unemployment insurance funds was condemned by all trade unions and employers' organisations alike for two main reasons:

• these institutions fulfil specific roles. The sickness, family allowance and pension insurance funds that make up the social security system were created to provide solidarity, while UNEDIC was designed to provide benefits to unemployed people and not to finance government policies; and

• these institutions are jointly managed. Their governing bodies are comprised of representatives of representative trade unions and employers' organisations, who, in principle, make independent decisions.

On this second point, the independence of the funds seems to have been further and further eroded over the years. The Juppé government's 1995 reforms mean that the social security budget is now decided by the National Assembly, whereas it used to be adopted in consultation with the Ministry responsible for social protection. UNEDIC, due to the important nature of the decisions it has to make, is now required to submit any agreements it reaches - on benefit levels and eligibility, for example - for approval by the Ministry for Employment. In addition, two major types of allowance exist within the unemployment benefit system - the UNEDIC fixed-term unemployment benefit, calculated in direct proportion to the jobless person's previous wage, and the government-administered unemployment assistance system, for those who are not eligible for unemployment benefits. This situation, combined with the development of mass unemployment, has prompted the government to take a very close interest in decisions made by the organisations concerned. The government is thus anything but absent from the running of these jointly-managed agencies and has the power to pass decrees to implement any provisions that it deems necessary.

Social partner reactions

The CFDT trade union confederation stated in a press release that: " it can only reiterate its disagreement with the very principle of levies on social protection funds to finance the reform of employers' contributions. Under present circumstances, there is no possibility of negotiating the implementation of a provision challenged by both unions and employers' organisations. With regard to UNEDIC, it is imperative that the government demonstrate its resolve to comply with its financial commitments so that negotiations on unemployment insurance can occur on the basis of known financial figures."

In the view of the CGT union confederation, the government's wish to use social security to fund "so-called job-creating" employers' social security contribution reductions, within the framework of the 35-hour working week law, "seems to be totally invalid and to preempt the desired objective". In the opinion of CGT, "billions [of FRF] in exemptions have already been allocated haphazardly and with no impact on unemployment. Due to reduced revenue, social security has cut spending and as a result has reduced the purchasing power of its members and hampered growth and job creation." The other unions expressed similar opinions: in the view of CGT-FO, this proposal represents a dangerous precedent; CFE-CGC considers the measure totally unacceptable; while CFTC also challenges it.

On the employers' side. the MEDEF confederation has described the government proposal as a casus belli, and vowed to resign from jointly-managed bodies if the government presses ahead with its current policy. MEDEF sees the government's attitude as a sign of the "absolute arbitrary power of a government trying to use the social partners as guarantors".

Jointly-managed funds oppose proposals

As a result of the stance taken by the social partners, the governing bodies of the three social security funds and of UNEDIC have come out against the planned funding arrangements. The argument of the National Sickness Insurance Fund (Caisse nationale d'assurance maladie, Cnam) argument speaks for itself: "Wishing to register its total opposition to the contribution levied on social funds for working time reduction" proposed in the social security finance bill "the governing body was unanimous in rejecting the entire bill ... The sickness insurance fund cannot, any more than any other fund, allow the resources, which it is committed to using appropriately, to be drained off to fund measures not related to the fund's primary objective of improving public health." Of the administrators of the National Pension Insurance Fund (Caisse nationale d'assurance Vieillesse,Cnav) administrators, 22 voted against the social security finance Bill for the same reasons, four took the government's case for granted, three "qualified officials" abstained and one voted in favour. The National Family Allowance Fund (Caisse nationale d'allocations familiales, Cnaf) and the Central Agency for Social Security Organisations (Agence centrale des organismes de Sécurité sociale- Acoss) also rejected the proposal.

Commentary

Negotiations are underway between the Ministry for Employment and Solidarity and the social partners to identify "non-authoritarian" solutions and a compromise to bridge the differences separating them. However, employers' opposition seems adamant, in so far as they are using this argument as fresh proof of the "harmful nature" of the 35-hour week. It will also be difficult to resolve differences with the unions.

This clash raises two important issues:

1. the difficulty experienced by the government in combining the reduction of the budget deficit with the implementation of the 35-hour working week - along with the costs it entails - which is the lynchpin of its social policies. Consequently, the government faces the great temptation of trying to find the necessary funds in areas of the budget that were not designed for this specific purpose and which do not fall under its direct jurisdiction; and

2. the principle of joint management as a way of overseeing a large number of social protection institutions has therefore been further weakened. Following the resignation of Jean Gandois as the organisation's president (FR9712188N), the new MEDEF management team had already threatened to pull out of all jointly-managed institutions. The trade unions too are concerned by the government's meddling in social partner decisions. Yet the French industrial relations system depends to a large extent on the principle of joint management. Nowhere else do unions and employers "cooperate" in such a way. If this system were to collapse or at least be stripped of its raison d'être, union-employer relations would have to be redefined. Undoubtedly, this would entail major upheaval. (Alexandre Bilous, IRES)