Unemployment rate falls

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The unemployment rate in France fell from 12.6% in June 1997 to 9% in January 2001, and labour shortages are starting to appear in some sectors. In early 2001, there has been considerable debate among the social partners and other parties as to the respective roles in the reduction of unemployment played by economic growth, the introduction of the statutory 35-hour working week, and the government policy of exemptions from employers' social security contributions in respect of low-paid jobs.

The unemployment rate in France fell from 12.6% in June 1997 to 9% in January 2001. Over the whole of 2000, the number of people out of work dropped by 432,000. The figure has fallen by 1 million since June 1997, when the current left-wing coalition government took office and the economic recovery began. Unemployment is thus at its lowest level since January 1984.

This decrease in unemployment has affected the various categories relatively equally, although men (whose unemployment fell 17.5% in 2000) have a slight advantage vis-à-vis women (down 16.4%), and the over-50s (down 12%) are at a disadvantage relative to the other age groups (down 17.8%). Youth unemployment has fallen at the same rate as that of all adults under 50. The number of long-term unemployed people has fallen faster than average (down 3.1% per month and 25.5% over the whole of 2000). There are now 699,000 people in this category, which still accounts for one in three registered job-seekers.

Unemployment has also decreased, though to a lesser degree, if those job-seekers who have worked more than 78 hours in occasional or short-term employment during the month (those on fixed-term contracts or temporary agency workers etc) are included in the equation.

Although welcoming the drop in unemployment, the trade unions, particularly CGT and CGT-FO, have stressed that the extent of precarious employment has not noticeably diminished. CGT thus commented that "of the 350,000 people coming off the official unemployment register, 50% were removed for administrative reasons by the National Employment Agency itself and, of the 255,000 job offers, 50% are for jobs on contracts of zero to six months". The Minister for Employment and Solidarity, Elisabeth Guigou, admitted as much, stating that: "there is still a long way to go".

General buoyancy in employment

Falling unemployment has been the corollary of positive changes in the labour market. The number of jobs created in 2000 has been assessed as 512,000 in the for-profit sectors alone, while 1.6 million jobs have been created since June 1997 in the economy as a whole. This rise in the numbers in work, representing a 3.6% increase in a year, is a record for the past half-century. The increase is particularly spectacular in the construction industry (where employment rose by 4.8% in 2000) and the tertiary sector (4.3%), but industry has not missed the boat. In this sector, for the first time in three decades employment has stopped falling and an increase has even been recorded (1.7% in 2000), with 70,000 jobs created.

The high levels of job creation seen over the past four years have obviously stemmed from the economic recovery observed during the same period. However, as the Ministry of Employment has pointed out, "the economic context of recent times, although it has been galvanised by the effects of job creation on consumer confidence, cannot explain the historic fall in unemployment in France by itself". Indeed, current growth, when compared with the previous recovery in the late 1980s, seems particularly "employment-rich." The annual economic growth necessary to create employment fell from its 1980s average of 2.3%, to 1.3% in the 1990s. Two competing explanations for this can be put forward.

The first theory sees the jobs created as being the fruit of the policy of lowering social security contributions on low-paid jobs implemented since 1993. According to estimates from the Research and Statistical Studies Office of the Ministry for Employment and Solidarity (Direction de l'Animation de la Recherche et des Etudes Statistiques du Ministère de l'Emploi et de la Solidarité, DARES), these exemptions, worth around FRF 40 billion in 1999, have had a net effect equivalent to 170,000 jobs created (ie 1.2% of all employment). These estimates are based on the assumption that a 10% cut in labour costs leads to a 6% rise in the number of jobs created. Despite the article of faith which supports this interpretation of the figures, it cannot account for the full increase, as the recent Pisani-Ferry report on full employment ("Plein emploi", Jean Pisani-Ferry, Conseil d'analyse économique, la Documentation Française, Paris, December 2000) points out (FR0012111F).

On the other hand, the second possible explanation emphasises the government's employment policies. The Ministry of Employment has thus placed a figure of 292,000 on the number of jobs created in the "new services-youth employment" programme (FR9709163F), while 310,000 jobs have been created or retained by agreements on the reduction of working time following the introduction of the statutory 35-hour week (FR0001137F).

Labour shortages and labour market tensions

The recovery in employment levels has heralded the beginning of a paradoxical period in which employers are stressing their recruitment difficulties and talking of staffing shortages, while the number of unemployed people is still very high. The indicators of tension drawn up by the DARES in a comparison between supply and demand in the labour market reveal a growing imbalance within a certain number of industries, creating labour shortages: information technology, hotels-cafés-restaurants, construction, manufacturing, and transport. A survey from the National Institute of Statistics and Economic Studies (Institut national de la statistique et des études économiques, INSEE). has shown that in manufacturing, 52% of companies encountered problems recruiting staff in October 2000, compared with 29% in July 1999.

The MEDEF employers' confederation has attempted to blame this situation on the transition to the 35-hour week, but DARES has shown that the sectors with the greatest recruitment problems are not those in which the process of reducing working time has made the most headway, and at a national level, the total number of hours worked has not diminished.

These recruitment problems are specific to phases of rapid growth, and a similar pattern was observed during the recovery in the late 1980s. After a long period of mass unemployment, these shortages represent a partial return to normality in terms of recruitment conditions. However, it should be stressed, as the trade unions are indeed doing, that this recovery in employment has not led to wages rising again after they were more or less frozen by the mechanisms deployed for the changeover to the 35-hour week. Neither has it reduced the levels of precarious employment. On the contrary, temporary agency work and fixed-term contract posts make up a considerable proportion of the newly-created jobs. Only the proportion of part-time jobs has levelled off, due particularly to the abandonment of measures aimed at providing incentives for their creation.

Present employment levels in France are remarkable in many regards, and it will be some time before the relative roles played by economic growth, the reduction in working time, and social security contribution exemptions can be identified. However, the debate is under way as the answers will go a long way towards determining recommendations on the way in which the recovery is to be made sustainable. The question is whether measures should be taken to reduce labour costs further, or whether the 35-hour week should be imposed on all companies, as provided for by the legislation (FR0101117N). Depending on which priority is selected, state employment policies may assume very different forms.

Commentary

The unemployment rate in France was reduced from 12.6% in June 1997 to 9% in January 2001. A fundamental debate is beginning over whether this employment-friendly climate change is due to cuts in social security contributions for businesses or the reduction of working time. (Michel Husson, IRES)

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