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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Please note:

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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The French Labor Market

The French labor market in the post-1945 era was characterized by permanent employment contracts, employment protection laws which penalized business enterprises for firing employees, long paid vacations - up to five weeks a year, limited work week hours, bonuses twice a year, generous unemployment benefits, and healthcare and pension benefits.

As long as the French economy experienced continuous growth, till the 1970s (Refer Table II), it was able to generate sufficient wealth to meet the demands of the French government's welfare system...

Labor Reforms

Instead of introducing labor reforms, successive socialist and center-rightist governments in France increased benefits for workers. They realized that the French social model could not be sustained in the long run but complacency and fear of facing public wrath over the diminution of welfare benefits led them to place labor reforms on the backburner. On some occasions French politicians who had promised more benefits during elections in order to win votes, realized the ground realities once they were in government and attempted to push through reforms without adequate discussion with the affected groups and general public...

Post CPE - Analysts' Viewpoints

Many analysts criticized French students and labor unions who were protesting against the new employment law. They felt that the students wanted the safety and security of a permanent job. This depicted the lack of risk taking capability among the French youth. They were used to the comforts of permanent secure jobs with relatively high wage rates and limited working hours...

The Implications

Observers said that a very important labor reform was attempted in an ill-conceived fashion. The backlash that ensued would make French politicians avoid talking of labor reforms. Analysts also felt that the voice of the unemployed youth had remained unheard in the mass protests and strikes against the introduction of the CPE. The reform intended to help the unemployed youth had been hijacked by those still to enter work/unemployment and existing employees who had secure jobs in hand...


Exhibit I: Growth of Real GDP at Market Prices
Exhibit II: Key Statistics on French Labor Market
Exhibit III: Pension Expenses (% Share of the GDP)
Exhibit IV: Employment Contracts in France


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