New job creation pushes unemployment below 10%

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Since early July 1997, exceptionally strong employment growth has pushed down the unemployment rate in France, which fell below 10% in April 2000. A return to full employment is now a real possibility, but raises the issue of "hard-core" unemployment. In spite of the fact that unemployment remains high, some sectors are already experiencing problems in meeting their labour requirements.

Employment growth in France has been exceptionally strong since July 1997. In 1999, the private sector created 362,000 paid positions. A total of between 400,000 and 500,000 jobs have been created every year since July 1997. The rate of employment creation is gathering momentum. Over the year to July 2000, employment growth has reached an almost 50-year high. All sectors, including manufacturing, are now taking on new labour.

In addition to growth in new employment, the private sector is experiencing a change in the nature of employment. While most new jobs are fixed term, in the first quarter of 2000, open-ended contracts as a proportion of all new jobs rose to 33.8%, up from 29.7% in 1999. At the same time, worker mobility is on the rise. For the year to May 2000, the number of resignations rose sharply by 24.1% and terminations of employment contracts for reasons other than redundancy posted a substantial annual increase of 12%.

In light of the rapid pace of job creation, the unemployment rate, which peaked at 12.6% of the labour force in June 1997, has since recorded an almost uninterrupted slide (FR9909106N). In April 2000, it fell below the "magic" 10% mark. The number of unemployed people fell by 350,000 in 1999, and the fall has since continued to gather momentum, dropping by 483,300 (17%) since May 1999. In late May 2000, the National Employment Agency (Agence Nationale Pour l'Emploi, ANPE) recorded 2,355,000 seasonally-adjusted job-seekers, or, using the International Labour Organisation (ILO) calculation method, 2,547,000 job-seekers (9.8% of the working-age population). Such low figures had not been posted since October 1991.

In April 2000, wrangling erupted between the government and employers' associations over which should take credit for the cut in unemployment. Pre-empting the official announcement of the unemployment figures, the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), the General Confederation of Small and Medium-sized Enterprises (Confédération génrale des petites et moyennes entreprises, CGPME) and the Craftwork Employers' Association (Union Professionnelle Artisanale, UPA) issued a joint statement attributing the improved figures to "the vitality of French companies and their employees". Martine Aubry, the Minister for Employment and Solidarity, pointed to the impact "of economic growth, measures taken by employers and the government's employment policy". Indeed, the country is experiencing sustained economic growth, which according to the latest forecasts form the INSEE statistical institute, will reach 3.5% in 2000. The government puts a large part of the improved situation down to the reduction in the working week (FR0001137F), a measure strongly challenged by MEDEF. The Ministry for Employment and Solidarity has estimated that the move to the 35-hour week has either created or safeguarded 204,000 jobs since June 1998. Moreover, current economic growth is much more employment-intensive. Over the first half of 2000, the same economic growth rate yielded twice as many jobs as it did in 1998. Several explanations have been put forward for this phenomenon: the cut in social security contributions for low-paid workers; the increase in part-time employment (now accounting for 18% of workers); new flexibility gained from negotiations over the reduction of working time; and the role of temporary agency work (which now accounts for 17% of positions created annually).

Who benefits from the cut in unemployment?

All categories of unemployed people, in particular young people and the long-term unemployed, are now feeling the effects of the strong jobs growth. Unemployment among the under-25s has recorded the quickest drop (down 22.3% since May 1999), partly due to government employment policy measures aimed at providing young people with jobs (FR9709163F). Therefore, the end of compulsory national service should not create any major problems. Long-term unemployment (defined as a minimum of 12 months), which has been falling since mid-1998, dropped below the 1 million mark in November 1999, and then slumped further to 839,700 in May 2000 (down 22.6% over a year). Unemployment among the 50-plus age group also fell back by 12.8% over the year to May.

Although, the drop in the unemployment figures was applauded across the board, various commentators have put it in perspective. Indeed, the debate over the "real" unemployment figure has resurfaced. The number of unemployed people who work a limited amount (fewer than 78 hours per month), who are not included in the ANPE figures, continues to grow, reaching 508,500 in May 2000, or one job-seeker in five. Robert Hue, national secretary of the French Communist Party (Parti Communiste Français, PCF), points to the "surge in precarious employment". In the opinion of Annie Thomas, national secretary of the CFDT trade union confederation, "economic growth in itself will not be enough to overcome the problems of unemployment and precarious employment. There is a danger that a hard core of marginalised unemployed people forced to watch the recovery pass them by could develop." This is why CFDT is supporting a large-scale back-to-work policy. In the view of the CGT union confederation, "all effort must be focused on helping those unemployed people experiencing the most difficulty in finding a first job or returning to employment." The CGT-FO confederation, which also points to increased precarious employment, is calling for "the development of the training system".

How low can unemployment go?

Even in light of the fact that French unemployment remains among the highest in Europe, the pace at which it is retreating now makes the return to "full employment" before the end of the current decade, which was the goal set by Prime Minister Lionel Jospin in August 1999, a real possibility. The current speculation about just how low unemployment can go has rekindled the debate on the level of structural unemployment in France. Some experts put it at between 7% and 8%, while the Organisation for Economic Cooperation and Development (OECD) estimates it to be still 10.1%. While the government does not see why the drop in unemployment should not continue, the Bank of France (Banque de France) however maintains that it will be difficult to get unemployment below 8% or 9% without structural reform. The Union of Metallurgy and Mining Industries (Union des industries métallurgiques et minières, UIMM) is urging increased momentum in the structural overhaul process.

In general, two obstacles to reducing unemployment further are put forward. First, the social security and tax system, because of the "poverty traps" it creates, makes it difficult for unemployment to make the transition from benefits to employment. The recent "Belorgey report" showed that, for some minimum benefit recipients, returning to employment may mean a cut in income (FR0007174N).

Second, a disparity between vacancies and job-seekers' qualifications exists, especially in rapidly developing new technologies and services. Therefore, vocational training is crucial. The Prime Minister has commissioned Jean Pisani-Ferry to submit a report in summer 2000 on the economic conditions required if full employment is to be achieved.

Looming labour shortages

While the drop in the unemployment rate and the implementation of the 35-hour working week have not, for the time being, caused major wage increases, attention has now turned to the possibility of labour shortages. Some sectors - including computing, telecommunications, construction, mechanics, metalworking, electricity, electronics, hotels and restaurants, and transportation - are currently experiencing genuine recruitment problems. MEDEF puts the number of unfilled vacancies at over 800,000. UPA, the French Construction Industry Employers' Association (Fédération Française du Bâtiment) and the Confederation of Building Industry Craftworkers and Small Companies (Confédération de l'Artisanat et des Petites Entreprises du Bâtiment, CAPEB) have reached agreements with ANPE seeking to match the supply and demand of labour. Labour shortage problems in the construction and food industries are nothing new and are mainly due to difficult working conditions, especially working hours and low wages. This shortage means that companies have relaxed their qualification and skills requirements.

Commentary

The government's stated goal is to push unemployment below the 2 million psychological barrier by early 2002. Over and above this goal, the challenge is to alleviate the disparity between an unemployment rate that remains high and pressures in the labour market. Therefore the following two indicators should be closely monitored: the degree of recruiting problems; and the impact of the drop in unemployment on marginalised groups. (Annie Jolivet, IRES)

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