Unemployment insurance agreement finally endorsed

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An agreement reforming France's jointly-managed UNEDIC unemployment insurance scheme was formally endorsed by the government, at the third time of asking, in December 2000. This followed 10 months of intense negotiations, which became a power struggle between the government and the employers' associations and trade union confederations (CFDT, CFE-CGC and CFTC) which signed the deal. The new agreement reorganises the unemployment insurance system around a "back-to-work assistance plan" (PARE), under which unemployed people's eligibility for unemployment benefits is linked to them committing themselves to an individualised PARE contract. The National Employment Agency (ANPE) will be responsible for developing and implementing this scheme. The CGT-FO and CGT union refused to sign the new agreement, on the grounds that it does not improve the situation of unemployed people.

On 6 December 2000, the government formally implemented an agreement on the reform of the jointly-managed UNEDIC unemployment insurance scheme concluded in October 2000 by the main 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) - and three of the five representative trade union confederations, CFDT, CFE-CGC and CFTC. The CGT-FO and CGT union confederations refused to sign the new agreement, on the grounds that it does not improve the situation of unemployed people. The intense negotiations over the unemployment insurance reform lasted some 10 months, and had resulted in two earlier agreements between the social partners, which the government had refused to endorse.

The main stages of the negotiations

In late 1999, MEDEF launched a project aimed at achieving a "new social constitution" (nouvelle constitution sociale), to include a "social partner-led overhaul of the industrial relations system" (FR9912122F). As a result, the leaders of the five main trade union confederations and three main employers' associations met in February 2000 and agreed a joint list of eight main issues for negotiation in 2000 (FR0002143F). The first of these topics to be negotiated was unemployment insurance, with the existing agreement regulating UNEDIC due to expire on 30 June 2000.

A first draft agreement on reforming UNEDIC was tabled in June 2000 and was signed by all employers' associations and two of the five representative union confederations (CFDT and CFTC) (FR0006171F). It provided for the overhaul of the entire unemployment benefit system, based on a new scheme called the "back-to-work assistance plan" (Plan d'aide au retour à l'emploi, PARE). CGT-FO, CFE-CGC and CGT considered the agreement unacceptable and refused to sign (FR0007176N) on the grounds that:

  • it involved only a minor increase in the number of unemployed people covered by the unemployment insurance system. The eligibility requirement for unemployment insurance benefits was still set at four months' contributions, although the reference period was increased from eight to 12 months. Despite the agreement providing for the abolition of the existing reduction of benefits over the period of unemployment, the unions opposed to the deal held that much more could have been done to enhance benefits, especially in light of UNEDIC's current large surplus;
  • the "back-to-work assistance plan" (PARE) was compulsory, with all job-seekers covered by UNEDIC being required to sign a PARE contract in order to be eligible for benefits; and
  • they opposed the penalty system for unemployed people failing to comply with the terms of the PARE contract. These sanctions were to be largely defined and overseen by UNEDIC instead of the public employment service. The four-stage penalty system - a warning letter for a first refusal of employment, a 20% cut in benefits for the second job refusal, followed by suspension and complete withdrawal of benefits for the third and fourth refusals respectively - were severely criticised as being too harsh.

The government rejected this first agreement on the same grounds as the three non-signatory unions (FR0008184N). The government also demanded, among other changes, clarification of the funding relationship between UNEDIC and the state, and the repayment of part of the funding advanced by the government to UNEDIC in 1993.

On 23 September 2000, a second agreement was drafted by the employers' organisations and the two signatory union confederations (FR0009190F). This agreement provided for:

  1. a slight extension of unemployment insurance coverage (with entitlement opened up to those with four months' contributions in the previous 18 months);
  2. a scaled down compulsory PARE scheme primarily targeting those experiencing the greatest difficulty finding employment;
  3. a more precise definition of "appropriate employment" (those jobs that unemployed people are required to accept if they do not wish to be disqualified from receiving benefits in the future);
  4. a review of the penalties for failing to observe job-search requirements. A new dual penalty system would be set in place. The first prong of this system would be based on statutory requirements (the Labour Code) and the second on collective bargaining through the implementation of the PARE; and
  5. a review of the agreement's funding arrangements. A cut in employer unemployment insurance contributions, initially planned for 1 January 2000, would be put back by six months. This would provide savings of FRF 16 billion.

CFE-CGC signed up to this second agreement. It had feared that a compulsory PARE scheme could lead to managerial and professional staff (represented by this confederation) having to accept employment below their normal level. The fact that the new agreement targeted unemployed people experiencing difficulty in finding work assuaged CFE-CGC's fears.

However, once again, the government refused to endorse the agreement (FR0010195F). It continued to challenge the provision whereby, after a period of six months' unemployment, job seekers would be forced to accept any job matching their occupational abilities and not just "those that met their level of experience and qualifications, as is their right under the Labour Code". The government was also at odds with the supervisory and penalty-imposing role bestowed on UNEDIC by the agreement. In the view of the government, it was more appropriate to take a legislation-based approach in this area and apply the principles of the Labour Code. The final sticking point was related to finalising the agreement's funding arrangements and to the government's contention that it would be impossible to fund improved benefits and the development of the PARE scheme at the same time as allocating the whole UNEDIC annual surplus to fund cuts in social security contributions.

Third agreement finally endorsed

The signatories (the employers' organisations, CFDT, CFE-CGC and CFTC) returned to the negotiating table and came up with a third agreement in October. Judging that the government had got what it wanted on all the disputed issues, Elisabeth Guigou, the new Minister of Employment, considered that she could now endorse the latest agreement. Her approval and the subsequent implementation of the agreement by law on 6 December has cleared the way for a reform of the unemployment insurance system. Thus, as from 1 July 2001, the PARE scheme will be applied to all unemployed people covered by UNEDIC.

An important aspect of the third agreement is that it clarifies the funding arrangements between the government and UNEDIC (by cancelling the last stage of a planned series of social security contribution cuts, initially slated for January 2003, and by providing for UNEDIC to pay some FRF 20 billion to the government). Only part of the agreement will come into force on 1 January 2001 (the schedule for cuts in social security contributions). In light of the fact that implementation of the PARE scheme will require a partnership agreement between UNEDIC and the National Employment Agency (Agence Nationale Pour l'Emploi, ANPE), it will not come into force until 1 July 2001.

From that date, a new system will govern UNEDIC-covered unemployed people. When they first register as unemployed, they will be required to sign a PARE contract if they have worked for four of the preceding 18 months. The following month, each unemployed person will undergo a first in-depth interview with an ANPE official. This is designed to evaluate the jobless person's "degree of autonomy". Then, job seekers will sign a "individualised action plan" (plan d'action personnalisé, PAP), geared to evaluating skills and the type of employment matching the person's "occupational abilities, formal qualifications, career background and professional experience". The monitoring and penalty-related measures in the new agreement will be based on the Labour Code and decisions by Ministry of Employment officials, since the government refused to allow UNEDIC decision-making authority on these issues.

Nevertheless, CGT-FO and CGT refused to sign on to the new agreement. These two union confederations are challenging the fact that the PARE scheme is compulsory and that eligibility for benefits is tied in to signing a PARE contract. They also point to the very small increase in the number of unemployed people covered by the unemployment insurance system. They claim that, despite a slight relaxation of eligibility criteria, still only four out of every 10 unemployed people will be eligible, with the rest being covered by state-run support schemes, in particular the "occupational integration minimum income" (Revenu Minimum d'Insertion, RMI).


Who are the winners and the losers in the reform of unemployment insurance? It is difficult to say at the present time and the answer will depend on the actual terms of the implementation of the PARE scheme. Nevertheless, it is possible to draw some initial conclusions.

From a political standpoint, MEDEF's strategy of sidelining the government from process it has initiated of defining a "new social constitution" has failed. This failure is demonstrated by the major role the government played in drafting the final version of the UNEDIC agreement. In fact, the final agreement makes major concessions to the government, especially, compared with the initial version. However, CGT-FO and CGT see things differently. They believe that very few substantive changes have been obtained since the outset of negotiations, hence their refusal to sign up to the agreement. Ironically, this stance has arguably played directly into the hands of MEDEF.

From a social viewpoint, the non-signatory unions are right in pointing out that this reform will have only a minor impact on eligibility criteria for unemployment benefit. The majority of unemployed people will continue to be covered by the state-run benefit schemes, rather than UNEDIC. The issue of extending the scope of UNEDIC coverage should have dominated the negotiations, but this was not the case. Debate very quickly focused on the compulsory nature of the PARE scheme, which is already a reality in many other European countries.

A different outcome would have required a complete overhaul of the whole benefit system. This would have needed joint government-social partner cooperation on how to revise the current unemployment benefit rules governing UNEDIC and state-run unemployment assistance schemes. However, against the highly politicised backdrop of "the current overhaul of industrial relations" project, it would have probably been very difficult for the government to invite itself to the negotiation table (FR0002143F). (Carole Tuchszirer, IRES)

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