Unemployment begins to increase

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Unemployment in France has begun to rise again since April 2001 ending, at least temporarily, a period of robust employment performance. The government has responded by launching various new employment-support initiatives. The extent of this reversal of the trend of the previous four years will depend in part on economic policy choices, particularly at European Union level.

In October 2001, the unemployment rate in France has been rising for some months. In the period from April to August 2001, the official number of unemployed people - those in 'category 1' as classified by the National Employment Agency (Agence Nationale Pour l'Emploi, ANPE) - rose by 64,700. This increase puts an end, at least temporarily, to a very significant downward trend in unemployment figures. Whereas the jobless figure hovered around the 3 million mark over 1995-7, it started dropping rapidly from 1997 onwards (FR0007179F). The number of people out of work fell by 126,600 in 1998, by 339,400 in 1999 and by 421,600 in 2000. Between the peak in June 1997 (3,137,500 jobseekers) and the lowest level in April 2001 (2,063,100 jobseekers), the total number of unemployed people fell by over 1 million.

Four-year improvement

The drop in the jobless rate from 1997 was, as might be expected, due to remarkable momentum in employment creation, representing a clear departure from past trends. In the private sector (excluding civil service and agriculture), the employed workforce grew by 284,500 en 1998, by 407,300 in 1999, by 540,700 in 2000 and by 166,200 during the first half of 2001.

The scale of the fall in unemployment is undoubtedly overestimated by the official ANPE indicator - category 1, which covers unemployed people, immediately available for work, and looking for full-time, open-ended employment - insofar as other numbers of other categories of jobseekers have continued to rise more quickly. According to an analysis by CERC-Association, between June 1997 and June 2001, the number of individuals seeking part-time or fixed-term work, or working in small-scale employment of over 78 hours per month, rose by 371,400, therefore limiting the overall drop in the unemployment rate. When 'job cancellation' and obligatory part-time working are taken into account, the official indicator represents only 47% of all the 'underemployed' or unemployed, compared with 61% in 1996 and 75% in 1981.

The drop in the unemployment rate has been accompanied by a change in the make-up of the unemployed people measured by the official indicator, whereby long-term unemployment (over a year) has declined from 35% to 31% of those individuals recorded as out of work. The percentage of unemployed people under the age of 25 has dropped by two points. However, this cut in the jobless rate has been felt less among women and people aged over 50.

The economic upturn also ushered in structural changes in employment. The most spectacular phenomenon has been the rise of temporary employment agency work. The National Institute of Statistics and Economic Studies (Institut national de la statistique et des études économiques, INSEE) Employment Survey found that between March 1997 and March 2001, the number of individuals in temporary agency jobs nearly doubled, from 330,000 to 605,000. However the number of other so-called 'non-traditional-type' jobs has tended to decrease. In terms of net new job creation in the private sector during this period, open-ended employment predominated (78%), which reversed the trend recorded during the period of low growth between 1990 and 1997. The share of part-time work, which increased from 11.9% to 16.6% between 1990 and 1997, has remained stable at this level. Closer inspection reveals that the percentage of part-time workers wishing to work more has begun to drop. This decrease is more marked among men and those working in short-term jobs. All these changes have altered the way in which the labour market functions. The market has, as is the case during all periods of economic recovery, experienced increased tensions, while employers have been complaining of labour shortages.

Return to uncertainty

The economic downturn which started in recent months has completely altered the agenda, occurring as it has against the backdrop of the new era ushered in by the 11 September attacks on the USA. As early as spring 2001, a certain number of companies - including profitable ones - were unveiling redundancy plans, which gave rise to relatively novel forms of social mobilisation (FR0104147F). Ever since, to a certain extent, all the social partners have been anticipating a turndown, even at the risk of precipitating one.

Employers have shown themselves to be much more pre-emptive than in the past, particularly in terms of using temporary employment agency labour as a means of making rapid adjustments. Consequently, between January and June 2001, some 100,000 temporary agency jobs were shed. Employers' associations have referred to the vagaries of the economic situation in lobbying on two sensitive issues. First, they want to reduce the impact of the move to the 35-hour working week which is to be implemented in companies with a workforce of under 20 on 1 January 2002 (FR0110108F). Second, they are advocating that the wage freezes accompanying the move to the 35-hour week (FR0009191F) should become a permanent feature and that the new system should have less influence on the setting of the national minimum wage (FR0107171F).

In light of the early warning signs indicating that a slowdown was in the offing, the government has responded with two types of employment-support initiatives. The Minister of Employment, Elisabeth Guigou, unveiled a plan to kick-start employment through the creation of new assisted jobs: 30,000 'employment solidarity contracts' (contrats emploi-solidarité) and 20,000 'training and employment insertion courses' (stages d'insertion et de formation). She also promised less constraint in the enforcement of the 35-hour working week in small and medium-sized companies. For his part, the Minister of Finance, Laurent Fabius, announced several initiatives to support demand, including the doubling of the tax credit allocated to low-wage earners.

Commentary

The current return to the 'socially-oriented' treatment of unemployment is a clear indication of the end of a certain euphoria and the reappearance of matters of concern. The debate over the December 2000 report on full employment from the Economic Analysis Council (Conseil d'analyse économique) - the Pisani-Ferry report- has given rise to two diverging assessments of the reasons for the robust employment performance achieved between 1997 and 2001 and, as a result, of the ways of building on it (FR0012111F). Emphasis on the respective virtues of either a shorter working week or cuts in labour costs leads to almost opposite measures being proposed and to different economic policy instruments being focused on.

Lastly, uncertainty is spreading across the European Union and the issue being addressed is how to implement the Stability and Growth Pact reached in parallel to the Amsterdam Treaty, in June 1997 (EU9707135F). What is the correct balance to be struck between European Central Bank anti-inflation policy and the coordination of budgetary policies?

The answer to this fundamental question will ultimately orientate the development of the economic situation over the coming months, either towards a sustained slowdown featuring a sustained erosion of jobs, or towards a recovery enabling the major gains made over the past four years in terms of employment and unemployment to be maintained. (Michel Husson, IRES)

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