Unemployment insurance cutbacks agreed

Download article in original language : FR0207102NFR.DOC

In June 2002, French employers' organisations and some trade unions agreed economy measures aimed at balancing the books of the UNEDIC unemployment insurance scheme, which they manage jointly. The agreed measures include increases in contributions and cuts in benefit, aimed at dealing with a mounting deficit in UNEDIC. The CGT and CGT-FO union confederations refused to sign the agreement.

The financial situation of the jointly-managed UNEDIC unemployment insurance fund has worsened recently. This has occurred in the context of the UNEDIC reform that led to the creation of the 'back-to-work assistance plan' (Plan d'aide au retour à l'emploi, PARE) in 2001. This plan is based on personal supervision of unemployed people and is supposed to result in their quicker return to the labour force (FR0101114F). However, the slowdown in economic growth has thwarted this objective, placing UNEDIC in a tight financial tight situation. The annual deficit of the unemployment insurance scheme, estimated at EUR 2.4 billion in March 2002, may reach EUR 3.2 billion by the end of the year if no cutbacks are made. Employers' organisations and trade union confederations thus met on 19 June 2002 to attempt to restore financial balance to UNEDIC.

An agreement was reached at the meeting, providing for a number of cut-backs and economy measures. The main changes affecting employers and employees are as follows:

• it has been decided to give up the idea of lowering labour costs by cutting social security contributions by 0.1% of gross pay, a measure which had been planned to come into force on 1 July 2002. Indeed, from this date unemployment insurance contributions have actually been increased by 0.2%, raising the employer's contribution to 3.7% of pay and the employee's to 2.1%; and

• UNEDIC has asked the government for a moratorium on the repayment to the state of a debt totalling EUR 1.2 billion that UNEDIC had accrued in 1993. The government has agreed to this request.

Other measures agreed will affect job-seekers:

• the July 2002 increase in the amount of unemployment benefit was only 1.5%, rather than the predicted 2.4%;

• the waiting period for eligibility for benefit has been increased from seven to eight days;

• the waiting period for access to the compensatory scheme has been extended (this waiting period is applied to redundancy payments made in excess of the statutory ones); and

• the criteria for benefit entitlement for unemployed people aged over 55 have been toughened. Until now, unemployed people aged over 55 received unemployment benefit for up to five years if they had paid 27 months' contributions in the previous 36 months. Between 1 July and 31 December 2002, the criterion for receiving benefit for this length of time will be 25 years of employment.

These stringent planned cutbacks have not, however, overturned one of the basic advances of the 2001 reform, the elimination of the 'single decreasing benefit' (allocation unique dégressive, AUD). This principle meant that payments decreased over time and was seen as extremely punitive, as every six months the value of an unemployed person's unemployment benefit was reduced. The 2001 reform abolished this principle, but provided for the option of reintroducing it if financially necessary. Despite the crisis that UNEDIC is currently experiencing, the agreement reached on 19 June did not overturn this measure benefiting the unemployed. This can probably be explained by the desire to accommodate the unions that endorsed the 2001 reform - the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), the French Christian Workers' Confederation (Confédération française des travailleurs chrétiens, CFTC) and the French Confederation of Professional and Managerial Staff-General Confederation of Professional and Managerial Staff (Confédération française de l'encadrement-Confédération générale des cadres, CFE-CGC).

The agreement of 19 June was reached by the same three union confederations and the employers' organisations - the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), the General Confederation of Small and Medium-sized Enterprises (Confédération générale des petites et moyennes entreprises, CGPME) and the Craftwork Employers' Association (Union professionnelle artisanale, UPA). However, the General Confederation of Labour (Confédération générale du travail, CGT), and the General Confederation of Labour-Force ouvrière (Confédération générale du travail-Force ouvrière, CGT-FO) refused to sign the deal. These two unions have consistently opposed the reform which led to the establishment of the PARE, stating that this plan forces unemployed people to accept precarious employment. They feel that the cutbacks imposed by the June 2002 agreement are the result of the PARE and refuse to accept that unemployed people, already penalised by this measure, should have to bear the costs of the system's drift into deficit.