Labor Market Reforms in France and the Job Law 'CPE' - A Lost Opportunity

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Case Details:

Case Code : BENV004
Case Length : 16 Pages
Period : 1991-2006
Pub Date : 2006
Teaching Note :Not Available
Organization : French Government, Labor Union
Industry : Labor
Countries : France

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It's a vicious circle. We are forced to protect ourselves from these laws by not hiring anybody. I cannot hire as I cannot fire."1

- Jean-Francois Roubaud, owner of a Paris based construction company on French Labor Employment Protection Laws, in 2006.

"We must make it easier and more interesting for people to work than live on benefits"2

- Dominique De Villepin, Prime Minister, French Republic, in September 2005.

"I prefer to live in a world where you can get fired within two weeks but find work quickly, than in a world where you have a job for life but it takes five years to find another if you lose it."3

- Renaud, an employee in a financial consulting firm in 2006.


After weeks of protests and demonstrations by students and workers, the French government, on April 10, 2006, withdrew the First Employment Contract (CPE)4, a law framed to allow employers to dismiss workers, under the age of 26, in the initial two years of their service, without providing any reason. The French President Jacques Chirac (Chirac) said that he had decided to replace the CPE with another set of measures that would boost employment opportunities for the French youth. In the same week, the French parliament passed a new proposal on "young people's access to employment in companies"which aimed at subsidizing firms hiring applicants under 26 who either had low qualification or were in an underprivileged situation.

It was estimated that around 160,000 young people would benefit through these measures in the year 2006 and that they would cost the French government 150 million euros5.

The earlier legislation - the CPE - signed into law by the French President on April 02, 2006, drew widespread protests from millions of students and workers in France. There were several occasions when violence erupted, with anti-social elements vandalizing shops and clashing with the police.

The protests drew worldwide attention to the high rates of unemployment among French youth as well as the rigidity of the French labor market. The French labor market was highly regulated, with the state deciding the minimum wages and working hours, and making the firing of employees extremely difficult.

Labor Market Reforms in France and the Job Law 'CPE' - A Lost Opportunity - Next Page>>

1] "French Businesses See Stagnation as Work Law Scrapped,", April 13, 2006.

2] "Ashley Seager, "French Flunk Labour Reforms,", September 08, 2005.

3] Henri Astier, "Desire for Stability Drives French Unrest,", March 31, 2006.

4] CPE in French stood for Contrat Premiere Embauche.

5] As on April 28, 2006, 1 US$ = 0.79648 euro.


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