Social partners react to planned cuts in social security contributions

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In May 1999, the French government unveiled a plan to reduce employers' social security contributions in respect of low-paid employees, to accompany the move to the statutory 35-hour working week. These measures will be funded through an "ecotax" and a levy on social security fund-holding bodies.

On 19 May 1999, the Prime Minister, Lionel Jospin, launched debate on a plan to cut employers' social security contributions in respect of low-paid employees, to accompany the move to a 35-hour working week by 2000 (2002 for smaller firms) following the legislation on this issue in June 1998 (FR9806113F). The idea is that such subsidies will promote the employment of such lower-paid workers (FR9905181F)

Under the proposals, companies that have reached an agreement on the move to the 35-hour week will benefit from a specific reduction in social security contributions paid on wages not exceeding 1.8 times the SMIC statutory national minimum wage. This new provision will redistribute FRF 25 billion between companies. Half of the funding will come from an "ecotax" on pollution and the other half from a contribution levied on profits (companies with a turnover of less than FRF 50 million will be exempt).

Funding for the promised "structural assistance" to facilitate the move to the 35-hour week - ie cuts in social security contributions if a company-level agreement has been reached, which benefit all categories of employees, whatever their pay level - has yet to be specified. This funding will be set out in the second law on the 35-hour week, due to be published later in 1999 (FR9904173F), and will bring the total reductions in employers' social contributions to FRF 65 billion. The government is especially banking on the positive impact that this will have on job creation and on revenue for the National Union for Employment in Industry and Commerce (Union nationale pour l'emploi dans l'industrie et le commerce, UNEDIC), which is responsible for unemployment benefit, and the social security system.

The reactions of the social partners to the proposals have been generally negative:

• the CGT trade union confederation has expressed "its most serious misgivings", stating that "experience has shown that social contribution exemptions on the lowest paid lead to lower wages across the board and foster a situation where qualifications are not recognised." The CGT's general secretary, Bernard Thibault, is demanding that "the assistance scheme for certain companies be conditional on the genuine creation of jobs";

• CFDT supports the reform of employers' social contributions. Nevertheless, it is concerned about funding for the reform - "the theory being bandied about, whereby UNEDIC and the social protection organisations will have a shortfall of FRF 40 billion is an unthinkable solution",

• CFE-CGC criticises the cuts in social contributions on low wages. In the opinion of the union confederation's national secretary, Jean-Luc Cazettes, the reduction "will will harm skilled employment, by encouraging companies to cap wages at 1.8 times the minimum wage" and "will not create jobs";

• CGT-FO is also very critical, and its general secretary, Marc Blondel, considers that there "could be an even greater shift to low-wage jobs. The SMIC is becoming the driving force for pay, which is bad news for wage bargaining"; and

• the MEDEF employers' confederation considers that there will be "no redistribution between companies". The organisations's chair, Ernest-Antoine Seillière stated that the "measure is not a zero-sum package ... Companies' cash-flow will be reduced due to the new taxes to pay for non-working, leisure time." In MEDEF's opinion, if the government continues to "diminish France's attractiveness" for industry, there will be "mass company relocation"

The Minister for Employment and Solidarity, Martine Aubry, was due to meet with the social partners in late May to discuss all the questions surrounding the development of the second 35-hour working week law.