# The French approach to flexicurity

Isabelle Terraz

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Isabelle Terraz. The French approach to flexicurity. European Trade Union Confederation: ETUC, ETUC, 2008. hal-00279490

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# The French approach to flexicurity

Isabelle TERRAZ

BETA, Université Louis Pasteur, Strasbourg

The European Union's goals, stated at the Lisbon Summit in 2000 and reiterated in the context of the employment guidelines in 2003 and again in 2005 (CEC 2005), are to promote labour market flexibility while offering workers more security. Accordingly, the European Commission has called for the achievement of "the right balance between flexibility and security" so as to "support the competitiveness of firms, increase quality and productivity in work and facilitate the adaptation of firms and workers to economic change".

Achievement of a balance along these lines appears particularly delicate in France where increased recourse to temporary contracts has contributed to the development of external flexibility, and where workers, during the same period, have experienced a diminution of their sense of job security. The growing sense of insecurity would seem to be attributable to the increase in precarious jobs as well as the chronically high and long-term unemployment. In response to this situation the social partners adopt radically opposed approaches, while the government, depending on its political hue, has a tendency to pass legislation that will favour one side or the other. The political crisis surrounding the "contrat première embauche" (first employment contract) in the course of 2006 was a perfect illustration of the difficulty of social dialogue and systematic recourse to the law. In any case, the concomitant development of flexibility and a feeling of insecurity in relation to employment undoubtedly contribute to an understanding of how it was that this plan crystallised the dissatisfactions of young people and trade unions, ultimately forcing the government to alter its plans. Developments in France thus appear to be very far from moving in the direction of the European Union's goals.

How is this manifest discrepancy to be explained? In this chapter we seek to offer a brief description of the operation of the French labour market, while also looking back over the main proposals for reform discussed in recent years. This exercise will serve to indicate, first, how the concept of flexicurity is perceived in the academic and political world (section 1). We shall then go on to evaluate recent measures to see whether and how they have succeeded in reconciling the two dimensions in question, in particular through an examination of redundancy procedures (section 2). We shall conclude with some thoughts on, in particular, the development of precarious employment and the fate of workers employed on this type of contact (section 3).

## I. The French debate on the labour market

The French labour market is beset by numerous ills (paragraph 1) but its reform represents a highly delicate enterprise. The task of reconciling flexibility and security would appear to be particularly difficult and it is obvious that the social partners find it hard to reach a common understanding of this concept.

### 1. The current situation

Whereas several countries have met with considerable success in reducing their unemployment rates, in France this rate has remained at a high level, almost three percentage points above the average for the OECD countries (Table 1). Viewed overall, the problem of
unemployment in France appears particularly severe at the two extremes of working life. In 2005, among young people the activity rate is low (38.4% as against an EU-25 average of 48.7%) and those who do belong to the working population are overrepresented in unemployment. The employment rate among older people is also low (37.9%), as against an EU-25 average of 51.8% (European Commission 2006). The situation in this respect reflects employment policy choices made in the late 70s which gave priority to measures that encouraged persons over 55 to withdraw from the labour market.

<table><caption>Table 1. Unemployment rate in 18 OECD countries in 2004</caption><thead><tr><th>Country</th><th>15-24 years</th><th>All</th><th>Country</th><th>15-24 years</th><th>All</th></tr></thead><tbody><tr><td>Germany</td><td>11.7</td><td>9.9</td><td>Greece</td><td>26.5</td><td>10.4</td></tr><tr><td>Australia</td><td>11.7</td><td>5.5</td><td>Ireland</td><td>8.1</td><td>4.4</td></tr><tr><td>Belgium</td><td>17.5</td><td>7.4</td><td>Italy</td><td>23.5</td><td>8.1</td></tr><tr><td>Canada</td><td>13.4</td><td>7.2</td><td>Japan</td><td>9.5</td><td>4.9</td></tr><tr><td>Denmark</td><td>7.8</td><td>5.3</td><td>Norway</td><td>11.7</td><td>4.5</td></tr><tr><td>Spain</td><td>22.0</td><td>11.0</td><td>Netherlands</td><td>8.0</td><td>4.7</td></tr><tr><td>United States</td><td>11.8</td><td>5.6</td><td>Portugal</td><td>15.3</td><td>7.0</td></tr><tr><td>Finland</td><td>20.8</td><td>8.9</td><td>United Kingdom</td><td>10.9</td><td>4.7</td></tr><tr><td>France</td><td>21.3</td><td>9.6</td><td>Sweden</td><td>17.0</td><td>6.6</td></tr><tr><td></td><td></td><td></td><td>OECD average</td><td>13.4</td><td>6.9</td></tr></tbody></table>

Source: OECD 2005

What is more, jobless persons remain unemployed for longer, thereby exacerbating the problems of skills loss associated with time spent out of work. According to the Commission (2003), in Denmark less than a quarter of the unemployed have been unemployed for two successive years, whereas this figure is 60% in Belgium, France and Italy. The average length of unemployment is more than 16 months in France, as against 12 months for the OECD countries (Figure 1).

<figure><img src="image_2.png" /><figcaption>Figure 1: Average period of unemployment (in months) among persons aged 25 to 54 in 2003</figcaption></figure>

Source: OECD, quoted in Cahuc and Kramarz (2004)
Finally, over the last twenty years, the share of temporary jobs has increased sharply (Table 2) and the employment protection legislation was strengthened in the 1990s in France at a time when it was becoming weaker in other industrialised countries (OECD 2004).

<table><caption>Table 2. Share of temporary employment in total waged and salaried employment</caption><thead><tr><th>Country</th><th>1985</th><th>2000</th><th>2004</th><th>Evolution (in % points)</th><th>Country</th><th>1985</th><th>2000</th><th>2004</th><th>Evolution (in % points)</th></tr></thead><tbody><tr><td>Spain</td><td>16</td><td>32.1</td><td>30.4</td><td>+14.4</td><td>Germany</td><td>9.5</td><td>12.7</td><td>12.2</td><td>+2.7</td></tr><tr><td>Portugal</td><td>14</td><td>20.4</td><td>19.9</td><td>+5.9</td><td>Denmark</td><td>12</td><td>10.2</td><td>9.8</td><td>-2.2</td></tr><tr><td>Finland</td><td>16</td><td>16.5</td><td>16.2</td><td>+0.2</td><td>Italy</td><td>11</td><td>10.1</td><td>11.9</td><td>+0.9</td></tr><tr><td>Sweden</td><td>13</td><td>15.2</td><td>15.1</td><td>+2.1</td><td>Belgium</td><td>6</td><td>9</td><td>8.7</td><td>+2.7</td></tr><tr><td><strong>France</strong></td><td><strong>4.5</strong></td><td><strong>15.5</strong></td><td><strong>12.3</strong></td><td><strong>+7.8</strong></td><td>United Kingdom</td><td>6.5</td><td>6.7</td><td>5.7</td><td>-0.8</td></tr><tr><td>Netherlands</td><td>6.5</td><td>14</td><td>14.6</td><td>+8.1</td><td>EU-15</td><td>-</td><td><strong>13.5</strong></td><td><strong>13.3</strong></td><td>-</td></tr><tr><td>Greece</td><td>21</td><td>13.1</td><td>12.4</td><td>-8.6</td><td>OECD</td><td>-</td><td><strong>13.9</strong></td><td><strong>14.5</strong></td><td>-</td></tr></tbody></table>

Source: OECD 2006

It is true that France started out from a situation in which the share of temporary jobs was particularly small, as compared with the other European countries. It is also true that the amount of temporary employment has fallen at the very beginning of the 2000s, a period of considerable job creation. It would be a mistake to attribute the development of these types of contract exclusively to the employment protection legislation. The use of temporary contracts varies greatly from one sector to another and the sectors with the greatest employment growth are also those which use them the most (CERC 2005).

Overall, France has a rather significant share of temporary employment and exhibits strong growth in this form of employment over the last twenty years; however the unemployment rate remains high.

## 2. Proposals for reform

Recent studies from the academic and political world take the situation described above as their starting point for proposing labour market reforms. In this way they contribute to a more general debate about how to reconcile the problems of employment flexibility and security. Thus the recently issued CERC report<fnref n="1" /> (2005) on “employment security and the challenges of economic transformation” takes up numerous ideas and arguments put forward in the reports by Blanchard and Tirole (2003), Camdessus (2004), de Virville (2004), Cahuc and Kramarz (2004) or Marimbert (2004). While belief in the need to seek models for reform is shared by all these writers, there is divergence at the level of their detailed proposals.

The reports authored by Cahuc and Kramarz (2004) and Marimbert (2004) harshly condemn the French system of unemployment benefits and assistance for the unemployed, accusing it of being excessively complex, expensive and, above all, ineffective. The sheer number of bodies responsible for dealing with the unemployed, as well as their lack of professionalism, are presented as two major problems that contribute to long-term unemployment. By way of remedy, these authors perceive a need to simplify the system so that the unemployed, in their efforts to seek work and benefits, will be served at a “single counter” (“guichet unique”). They believe also that it would be more effective to profile the unemployed in a manner that would enable differentiated treatment depending on their chances of successful return to the labour market. In this context, the public service monopoly is very much called into question.

<footnote n="1">¹ Conseil de l'Emploi, des revenus et de la cohésion sociale</footnote>
The subject of the social cost of unemployment is also very close to the heart of these different reports. A worker who loses his/her job receives benefit financed from contributions paid by other companies and wage- and salary-earners. In this way, companies which reduce their labour force are requiring others to bear the burden of their redundancies. Three reports (Blanchard and Tirole (2003), Cahuc and Kramarz (2004), and CERC (2005)) accordingly advocate the introduction of financial incentives to encourage firms to internalise these costs. Along the lines of the "experience rating" practised in the United States, they propose to vary the unemployment insurance contributions paid by firms in accordance with their redundancy policy record<fnref n="2" />. Though the precise details of the proposed arrangements differ from one author to another, the goal is to limit firms' recourse to external flexibility in favour of internal flexibility.

Finally, Blanchard and Tirole (2003), Cahuc and Kramarz (2004) and Camdessus (2004) also propose simplification of labour law such as to arrive at a single form of employment contract, the "contrat unique". Currently the open-ended contract remains the standard reference in French labour law but forms of less secure contract are showing a tendency to develop (Table 2). Adoption of a single form of contract<fnref n="3" /> could accordingly represent a means of reducing unequal treatment among wage-earners. There is controversy on this score, however, and other authors advocate the creation of specific contracts such as the "contrat de mission" (De Virville 2004, CERC 2005), the duration of which – between 18 months and five years – would be determined by the length of the mission to be carried out in the firm. This type of contract would, accordingly, target highly skilled employees.

This latter proposal has been hotly debated between the social partners, and it is an idea that has been taken up by the French employers (MEDEF) in their proposals for modernisation of the Labour Code, while the French trade unions have firmly opposed any such arrangement. The opposition over employment contracts was thus already a stumbling block between the social partners, when it once more became the focus of debate following the proposals issued by the Villepin government (July 2005 and 2006) to introduce new forms of employment contract. The proposed contracts<fnref n="4" /> were designed, in particular, to lengthen the period during which a company may terminate a worker's contract without the need to state any grounds for dismissal by introducing a trial period of two years. The French employers, regarding the traditional employment contracts as too rigid, were in favour of these new arrangements, whereas the trade unions are opposed to precarious forms of employment. In this way the opposition between the two sides in industrial relations has become crystallised around matters of employment contract and dismissal procedures.

More generally, these recent developments serve to reveal the oppositions between social partners on the whole set of flexicurity issues. When questioned as to their understanding of

<footnote n="2">² Criticism of this system has focused on greater selectivity on recruitment, worsening of the financial situation of firms in difficulty, and an increased temptation for firms to conceal redundancies by dismissing workers on grounds of misconduct.</footnote>

<footnote n="3">³ In 2006 a total of eleven different employment contracts are found in French labour law.</footnote>

<footnote n="4">⁴ Two new labour contracts have recently been introduced in France. The "contrat nouvelle embauche" (new recruitment contract – CNE) is intended for firms with less than 20 employees whereas the "contrat première embauche" (first employment contract – CPE) is for young persons aged under 26. These two new forms of employment contract now exist in French labour law. However, employees have won court cases against employers who dismissed them without stating grounds in the framework of the CNE. As for the CPE, the President of the Republic has promulgated the law introducing it, while asking firms not to make use of its provisions.</footnote>
the concept, the social partners do not describe the same kind of content. While the French trade unions seek to develop the security dimension, the employers focus on the flexibility dimension. To give an example, one trade union (CFDT) gives priority in its demands to make career paths more secure by seeking to increase the possibilities for training and accreditation to facilitate labour market transitions. This is in line with the rationale of transitional labour markets (Schmid 1995, Gazier 1998, 2003). Another trade union (CGT) with a different conception of the notion of flexicurity has proposed introducing a genuine form of occupational social security cover (Dumas 2004) that would entail maintaining the rights of the person (employment contract, wage) in the event of job loss, thereby making firms more responsible for the consequences of their redundancy behaviour.

The employers, meanwhile, have sought in recent years to gain more flexibility in relation to the law on working time reduction<fnref n="5" /> introduced under the Jospin government in 2000. Without calling into question the law as such, measures have been taken that are designed to broaden the possibilities of recourse to overtime and a reduction in overtime pay in comparison with the initial provisions. They also call for a reform of the employment contract, which they claim represents a curb on recruitment. The high rate of unemployment is attributed to the excessive rigidity of French legislation in the sphere of labour law.

The recent debates on redundancy procedures and employment contracts are symptomatic of the different ways of social partners of perceiving the issues at stake and of the difficulty of social dialogue in France. These debates have gained new vigour as a result of recent amendments to French labour law but they have recurred many times in the French context over the years.

## 2. The reforms that articulate flexibility and security in France

Since the Lisbon Summit the organisation of the French labour market has been altered by no less than four laws: the law on working time reduction (January 2000), the law on social modernisation (January 2002), the Fillon law (May 2004) and the law on social cohesion (January 2005). In addition, a new employment contract was created by government ordinance in 2005 (contrat nouvelles embauches) (see infra) while a similar form was proposed for young people (contrat première embauche). This succession of laws reflects the importance of the employment problem in France but also the number of changes of government. It is also symptomatic of a country in which changes affecting the labour market are frequently introduced by law whereas elsewhere in Europe collective bargaining would tend to be used for this purpose. This succession of laws gives rise to a lack of legal security. Barely have new arrangements been introduced than they are abolished. In the space of a few years matters as diverse as working time, working time organisation, bargaining, training or dismissal procedures have thus been subject to legislation. We shall examine to what extent some of these have explicitly sought to reconcile flexibility and security.

Before considering the topics dealt with in these laws, it should be recalled that a report by the French employment ministry (DARES 2003) outlined a number of practices that would serve to combine flexibility and security. Among these is the development of practices by temporary employment agencies designed to retain their workers, especially the most highly skilled; and the existence of employer groupings which appeared to the authors of the report to illustrate this theme (Box 1).

<footnote n="5">⁵ This law reduced the statutory working week to 35 hours.</footnote>
**Box 1.**

*Temporary agency work* is developing to attract the most highly skilled workers. Agencies are becoming increasingly important as mediators between the employer and the worker. They do not hesitate to set tests to select the best candidates whom they then train. It becomes a kind of “key-in-the-door” service for firms (Lefèvre, Michon, Viprey 2002). Though still marginal, this is a developing trend.

The employer groupings (“Groupements d'Employeurs”) created in 1985 draw up an employment contract for a worker who is then placed at the disposal of their members. They put together “chunks of employment” to make up a full-time job. This arrangement has remained marginal, however, and is believed to affect between 15,000 and 20,000 workers mainly in agriculture (Bichat 2002). A constraint on the development of this type of arrangement lies in the fact that the employers involved must be bound by the same collective agreement.

These arrangements are interesting insofar as they relate to practices that have been in existence for some years. On the other hand, they affect sub-groups and their scope thus remains marginal. On a larger scale, as a result of the new laws, there exist other arrangements. Here we shall mention recent measures on training (section 2.1) and those concerning redundancy procedures (section 2.2).

**2.1 Creating career security by means of training**

In the view of the European Commission (2006), workers' access to training, in particular that of unskilled workers, is an essential component of the balance between flexibility and security. The OECD (2004: 227), moreover, has asserted that training has a positive impact on individuals' labour market performance and strengthens the employment security of more mature and less educated workers. In a more flexible world characterised by greater employment insecurity, workers' careers will be facilitated or rendered more secure by a higher level of training that should allow them access to a wider range of jobs. To this end, it is necessary to increase the general level of training and develop continuing training for those who have been unable to take advantage of initial training or whose knowledge requires updating. What is more, both internal and external mobility will be facilitated if the experience gained in the practice of an occupation is documented. Accordingly, the recent labour law provisions on validation of experience (2.1.1) and the individual right to training (2.1.2) seem to open up wider avenues of development for wage- and salary-earners.

**2.1.1 Validation of experience**

The arrangement put in place to validate skills acquired in the course of occupational activity is not new but has been recently extended by a section of the law on social modernisation. Originally conceived essentially in relation to higher education qualifications (1985), the system has been gradually widened to include all levels of qualification (Validation des Acquis Professionnels – Validation of Professional Experience 1992). Its principle consists in validating the components of a given qualification on the basis of a file prepared by the candidate, requiring a traditional form of test or examination for at least one component of the qualification. The last version of the arrangement, the *validation des acquis de l'expérience* (VAE 2002), introduces substantial changes to the “validation of professional experience” arrangement: it is now possible to validate an experience gained in an unwaged or voluntary capacity; the working time required before requesting validation has been reduced, and there
is the possibility of validating all the components of a qualification without going through a
traditional course of training. In theory, the latest law considerably extends the opportunity to
achieve a higher level of qualification.

In practice, the system turns out to be not quite so simple. As the latest arrangement is rather
new, it is difficult to evaluate it. It may be mentioned, nonetheless, that the candidates for
validation may apply to different ministries which operate each in their own way. Thus an
opinion from the Economic and Social Council of Midi-Pyrénées has judged "the procedures
too long, too slow and indeed too difficult for those who had only short periods in education"
(quoted in Cahuc and Kramarz 2004:104). These authors stress that the number of those who
follow the procedure through to the end is low in relation to the number of those who start
out.

The “validation of experience” procedure constitutes, in theory, an additional instrument for the management of mobility. For the time being, however, the arrangement remains marginal. What is more, it represents no guarantee whatsoever in terms of the actual professional mobility of persons who have gained qualifications via this path.

2.1.2 *Life-long learning*

The interprofessional agreement of 20 September 2003, which became the “lifelong learning” section of the Fillon law of May 2004, contained the following passage, repeated in the explanatory memorandum of the law: “Individual careers must be ‘secured’ so that mobility – so necessary today in the context of inevitable economic change and demographic upheaval – can be achieved in a manner that is positive, freely chosen by individuals and profitable for firms”. To this end the law requires firms to devote larger sums to training funds and creates an individual right to training (droit individuel à la formation – DIF) which can be implemented on the worker’s initiative but with the employer’s agreement as to the course of training followed. It starts out from the principle that, in a world of change, the higher workers’ level of qualification, the better equipped they will be to cope with transitions.

Firms' current expenditure on training is in excess of what is legally required but it is not necessarily targeted at those whose need is greatest. There exist significant differences in the sums devoted depending on the occupation exercised, the level of qualification and the employment status. Training is more widespread in the civil service, banks and insurance, where there is strong job stability, than in occupations where there is a high degree of job instability (Lainé 2002). It is more frequent for managerial staff (46% of whom receive it), and less widespread among wage-earners lacking formal qualifications (Goux and Zamora 2001). Finally, workers on temporary contract less frequently undergo training than those on open-ended contract (Gélot and Minni 2002). This observation is equally valid in other European countries, training being essentially offered to the younger and highly skilled workers in large firms (European Commission 2003). This targeting of training is in keeping with an economic rationale stressed by Cahuc and Zylberberg (2003) and based on the idea that training is economically worthwhile if it will lead to additional profit in excess of its cost. Furthermore, Heckmann (2000) recalled that it is difficult to train workers with an inadequate initial level of education. Accordingly, it is more profitable to invest in the training of young workers and those with a higher level of general education.

The individual training right (droit individual à la formation - DIF) has the merit of being a
matter of shared responsibility between the worker and the firm but it allows only short
training units (CERC 2005) and is not transferable between firms. It suffers from the same
shortcomings as the life-long learning arrangement in that the best qualified workers are the most keen to undergo training. The relative lack of enthusiasm on the part of the less qualified workforce, when it comes to training offers, is widely documented (Goux and Zamora 2001) and yet these are the workers most affected by job instability. In this respect, the professionalisation contracts (*contrats de professionnalisation*) implemented by the 2004 law represent progress, for they aim to reduce the inequalities in access to training by focusing on specific groups such young people or unemployed workers aged over 45.

For wage-earners life-long learing and validation of experience should, in theory, enable better management of their careers and entail less risk. However, training remains largely directed by firms which do not give priority to those workers who run the greatest risks. In the words of the CERC (2005) “training reinforces the Matthew effect: more is given to those who already have most”. Far from ensuring greater security for the workers most exposed to risks, training tends to exacerbate the inequalities between workers. The CERC continues: “continuing training, insofar as it is financed by the firm, will contribute very little to reducing the instability of certain segments of its labour force or to enhancing career security”. The validation of experience, like the individual right to training, do very little to remedy this problem insofar as they affect, at this stage, only a rather limited audience. What is more, the latter option offers only a limited amount of training time.

## 2.2 External flexibility and assistance for the unemployed : redundancy procedures

Redundancy procedures, a central component of a firms’ external flexibility, are a highly debated issue in France. They were once again at the heart of public debate at the beginning of 2006 in connection with the new employment contracts proposed by the government. As these developments have given rise to a great deal of opposition and are too uncertain to be analysed (will the arrangements be maintained? Are they compatible with European law?), we shall concentrate on the reforms introduced over the last five years. In general terms, the debate on redundancies had been revived by the law on social modernisation (2002) and continued by the Fillon (2004) and Social cohesion (2005) laws. Indeed, whereas the articles of the law on social modernisation gave the trade unions more power in restructuring, increased the possibilities for reinstatement of workers and required the negotiation of a working time reduction before redundancies, these articles were suspended in January 2003 and then repealed by the law on social cohesion. What, generally, are the new provisions (2.2.1) and what do they have to say about flexibility and security (2.2.2)? Such are the questions to be examined below.

### 2.2.1 Redundancy in the law on social cohesion

Apart from the sections on “housing” and “equal opportunities”, the law on social cohesion contains a rather lengthy title on employment providing for, among other things, the creation of employment centres to house the various operators responsible for dealing with the unemployed. This is an outcome of the idea of a “single counter” contained in the Marimbert (2004) and Cahuc and Kramarz (2004) reports. At the last minute, articles on redundancy measures were added. These articles are in four sections:

* *Less cumbersome redundancy procedures:* As mentioned earlier, provisions designed to strengthen consultation of the trade union before restructuring have been repealed. What is more, before the reform, an employment safeguard plan (*plan de sauvegarde de l'emploi*) was triggered as soon as the employer announced the intention of modifying a certain number of employment contracts. This entailed drawing up proposals for internal and external redeployment, measures to train and find
alternative jobs for employees. Such a plan will now be required only if the proposed contract is rejected by the employees, who have a fortnight to reach a decision in this respect. All in all, the deadlines for appeal in the case of dispute have been reduced.

* Increased role of the collective agreement: a second section is designed to strengthen negotiation so as to anticipate problems by negotiating in advance what will happen. This also entails forward planning of employment and skills.

* Redeployment in SMEs: a new redeployment arrangement is introduced for firms of less than 1000 workers. The employer is required to offer each worker to be made redundant a "personalised redeployment agreement" (CRP – *convention de reclassement personnalisé*) that will entitle the worker to an individual interview within a week of the agreement, a skills inventory, where appropriate, individual follow-up, social and psychological support measures and guidance and accompaniment measures. During the eight months of the CRP, the redundant workers who have been with the firm for more than two years are to be given the status of "continuing training trainee" and receive an allowance of 80% of the reference wage during the first three months and 70% during the remaining five months.

* Revitalising the employment pocket: Finally, companies making workers redundant must pay a contribution that will be used for the creation of activities, the development of jobs and mitigation of the effects of redundancies on other firms in the same employment pocket.

### 2.2.2 The content in terms of flexibility and security

In summary, the law on social cohesion amends the redundancy procedures to reduce their length in exchange for measures to assist the workers made redundant and an offer of redeployment. A procedure of this kind already existed for firms with more than 1000 workers but 80% of redundancies were in smaller firms. The intention, accordingly, is to remove the inequality in this respect between workers made redundant in small and in large firms. This law thus tackles a central point of the French debate, one which has been the subject of frequent controversy between the social partners for more than 20 years. It is instructive in this respect to note that this development comes in the wake of a failure of the negotiations on restructuring. The social partners were involved only in the negotiations on the implementation mechanisms for the agreement but did not state their opinion on the desirability of such a measure.

Overall, the provisions of the Social cohesion law on redundancies may be considered to constitute elements of flexicurity, as defined by Wilthagen and Tros (2004), insofar as they explicitly combine elements of flexibility and security:

* external flexibility in that the intention is to make redundancy easier,

* security in terms of income and a return to employment for the workers made redundant.

This law indeed covers several dimensions of flexicurity. Income security, first of all, in that the guaranteed allowances are higher than unemployment benefit. Employment security, secondly, in that the redeployment mechanism is intended to help unemployed workers find new jobs. Security in terms of the employment pocket, finally, because the firm implementing redundancies is required to pay a contribution to boost the economy in the employment pocket concerned. This last point is reminiscent of proposals contained in the Blanchard and Tirole (2003), Cahuc and Kramarz (2004) and CERC (2005) reports on the social costs of unemployment. In this way, firms that shed part of their workforce will bear part of the collective burden they have contributed to creating.
### 2.2.3 The impact of the reforms concerning redundancy

#### a. In terms of flexibility

Before analysing the impact of the latest reform, let us first of all recall some characteristics of the French legislation concerning redundancy in relation to open-ended contracts. Workers may lose their jobs as a result of individual or collective dismissal or redundancy. In the case of individuals the various reasons that may be given for putting an end to the contract (misconduct, economic, real or serious cause, etc.) do not all give rise to the same benefit entitlements for the workers concerned nor to the same obligations for the firms. Before the 1973 law it was up to the employee to prove the unfair nature of the dismissal. Since that date it has been up to the employer to justify exercising the right to dismissal before the administrative authorities or before the judge if the employee claims that the stated reason for the dismissal is unfounded. For collective redundancies<fnref n="6" />, the procedures are more restrictive for firms. The principles of redeployment and priority for vacant posts were generalised in 1989. In 1993 the requirement to implement a social plan (the “employment safeguard plan” in current terminology) was introduced for firms of more than 50 workers making at least ten workers redundant. This entails the provision of external and internal redeployment measures, including training measures to assist the redundant workers.

A comparison of collective redundancy procedures in seven EU countries<fnref n="7" /> (Chassard 2004) gives rise to several observations. The French law is not, overall, geared to the search for an agreement. What is more, it gives priority to redeployment where other countries prefer redundancy payments. According to this study only Germany has constraints as strong as France in relation to the requirement for external redeployment while no country has such strong internal redeployment requirements. Indeed, this problematic does not even arise in most countries. In summary, “whereas France has adopted a procedure which consists in requiring that the employer himself respect certain rules to ensure the redeployment of the workers, our principle trading partners stipulate the payment of redundancy compensation and contributions to redeployment funds” (Cahuc and Kramarz 2004). In addition, the French rules contain provision for numerous administrative controls. For example, the firms required to set up an employment safeguard plan are under the supervision of the labour directorate which can require them to amend the plan and hence begin the redundancy procedure all over again. In short, the redundancy procedures are complex, uncertain and protracted. The uncertainty relates not to the actual redundancy decision – for it is rare for workers to be reinstated – but to the time that it will take to reach a settlement and the financial implications.

The litigious nature of redundancies in France is confirmed by an OECD study (2004). Among the countries analysed it is here that the highest number of cases end up in the courts. As a percentage of persons losing their jobs, the rate of litigation was 25% in France in 2001, 22% in Germany, while it was 7% in Great Britain and 1.6% in Italy. In cases where the job loss is contested, the employer may be required to pay damages and risks penal sanctions.

Given this criticism what can be said about the new forms of redundancy ?

- The litigious tendency of French redundancy and dismissal procedures is exacerbated by the fact that things happen “in the heat of the moment” and there is reliance on the principle of information to staff representatives, yet without their being given any real bargaining powers. Accordingly, the provisions according to which redundancy

<footnote n="6">⁶ The term collective redundancy is used where two or more workers lose their jobs in a period of thirty days.</footnote>

<footnote n="7">⁷ The study covers Germany, Belgium, Spain, France, the United Kingdom and Sweden.</footnote>
procedures must be negotiated in advance of the event if a company is in difficulty can
turn out only to be beneficial and to reduce the extent of recourse to litigation. This
will contribute also to reducing the financial uncertainty as to the real cost of
redundancy and the time it will take to reach a final settlement.

- What is more, procedural aspects will be limited under the new law by the fact that an employment safeguard plan is triggered only if the redundant workers reject the proposal received, whereas previously firms were required to put in place a plan as soon as the change in employment contracts had been announced. The periods during which either the redundancy, or the respect of procedures, may be contested have also been reduced. For example, this period is reduced from five years to one year as regards compliance with the rules and validity of the redundancy.

Two factors are important: given the litigious tendency of French redundancy procedures the introduction of negotiation at an earlier stage, rather than in the heat of the moment, is to be welcomed. The difficult stages are bound to become more manageable if they have been codified at an earlier stage. The reduction of periods for appeal and the limiting of the procedural aspects will also help to curtail the length of proceedings. When workers lose their jobs it is much better, from the employer's as well as the worker's standpoint, for the situation to be clarified as soon as possible so that the requisite arrangements can be made. From the standpoint of the firm, this reduces the uncertainty associated with recruitment insofar as the details concerning termination of a contract in the event of problem with a particular worker will be speeded up. This measure thus responds to a reiterated demand from the employers for simplified dismissal procedures, insofar as complex requirements in this respect represent a curb on recruitment. From the standpoint of the worker, a faster clarification of her/his situation is bound to encourage him/her to look to the future. A study by Metaleurop of measures to assist the unemployed showed, in particular, that in some cases workers went on hoping for a long time that they would be able to return to their former job (Mazade 2005).

b. In terms of security

In income terms, the “personalised redeployment agreement” guarantees a higher level of benefit than unemployment insurance. In employment terms, it helps the unemployed in their search for work. The arrangement is too recent for any proper evaluation but it may be useful to see what lessons can be learned from an earlier relatively similar measure.

Various arrangements to assist the victims of redundancies have succeeded one another in France since the 1980s. These include the retraining and redeployment agreements (*conventions de conversion*) that were in force from 1987 to 2001 and were also designed to help the victims of redundancies. Help, provided for six months, consisted of personalised assistance in the form of training, help in preparing for interviews, or periods of work experience. The “personalised redeployment agreement” proposed by the social cohesion law closely resembles this arrangement. The coverage is the same – beneficiaries must have two years of seniority and be aged under 57 – and the nature of the assistance provided is the same. There are two differences, however: the new arrangement lasts for eight and no longer just six months and the sums devoted to training are supposed to be higher than those made available under the earlier arrangement.

These *conventions de conversion* did improve the beneficiaries' chances of returning to employment. After 21 months 82% had found work, whereas the overall percentage among redundant workers with the same characteristics was 77% (Cloarec, Weibel 2000). The study findings also state that benefiting from such a measure increases the chances of finding a
stable job (+7 points). On the other hand, one limitation of the arrangement's effectiveness is that it is the persons who are in any case best placed to find new employment quickly are those who derive most benefit from it. Thus a man benefiting from such an agreement significantly improves his chances of finding another job (+8 points), whereas the chances remain the same for women or workers in regions where the economy is ailing. Assistance for the unemployed here comes up against its own limit in that it is offered to no avail in the worst economic areas. In a country where the geographical mobility of jobseekers is weak, the problem of unemployment has to be treated in its entirety and must be accompanied by job creation incentives. The new measures designed to boost the economy in the employment pocket where the redundancies are taking place may represent a move in the right direction if they are provided with the requisite resources.

### c. The winners and the losers of the reform

There would seem to be definite evidence of an increase in flexibility as a result of the reform. The redundancy procedures may well turn out to be less protracted and to give rise to less litigation. The company stands to make tangible gains, all the more so in that it is not responsible for carrying out the measures. This question of the firm's involvement in redundancy procedures has been subject to numerous debates over the last twenty years. Various arrangements have succeeded one another seeking, alternately, to require firms to take more responsibility for helping those they make redundant or, on the contrary, to limit their involvement. These alternating measures are the reflection, once again, of choices made by governments of different political hue. As such, governments of the left will tend to strengthen the involvement of the firm in these processes while those of the right will seek to restrict it.

Increased security for the victims of redundancies would also seem to have been consolidated to the extent that, following a similar measure, their chances of returning to stable employment were improved. Providing assistance for redundant workers is beneficial and speeds up their return to employment. However, it does not improve the situation of those most at risk such as women, the low-skilled, or persons living in depressed economic areas.

However, it should not be forgotten that France has, in recent years, seen a significant development of precarious employment. A great deal of recruitment is on fixed-term contract whereas, theoretically, the legislation is meant to restrict the grounds on which firms are allowed to use this form of employment<fnref n="8" />. In 2002, 64% of recruitments<fnref n="9" /> were subject to such contracts (Richet-Mastin and Tomasini 2003), particularly in the services sector<fnref n="10" />. A corollary of this phenomenon is that the end of fixed-term contracts represents the main source of unemployment. Redundancies account for only 8.5% of registrations with the national employment office (Agence nationale pour l'emploi – ANPE) while the end of fixed-term contracts accounts for 43%. As such, the main reason workers become unemployed is that they reach the end of fixed-term contracts. In other words, the majority of those who enter unemployment are not affected by the arrangement discussed here.

Another significant characteristic of the French labour market in the last decade has been a drop in the number of redundancies (licenciements économiques) as compared with other

<footnote n="8">⁸ These jobs may be filled to replace an absent worker, while waiting for a worker to be recruited on open-ended contract, in the event of temporary increase in activity, for seasonal labour or in sectors where fixed-term contracts are traditionally not used.</footnote>

<footnote n="9">⁹ These statistics relate to workplaces with at least ten employees.</footnote>

<footnote n="10">¹⁰ Agency workers tend to be used in industry whereas services make more use of fixed-term contracts.</footnote>
forms of job loss. In 2002 such redundancies accounted for 8.5% of registrations at the ANPE and other forms of dismissal for 21% (Table 3).

<table><caption>Table 3. Reasons for registering with the national employment office (ANPE)</caption><thead><tr><td>Redundancy</td><td>Other form of job loss</td><td>End of fixed-term contract</td><td>End of agency contract</td><td>Resignation</td><td>Total</td></tr></thead><tbody><tr><td>8.5%</td><td>21.0%</td><td>42.6%</td><td>19.1%</td><td>8.8%</td><td>100%</td></tr></tbody></table>

Source: CERC 2005

Other statistics that support this observation, when the reasons for leaving a job are examined, are that redundancies represent 2% of cases, collective redundancies 0.5% and termination of contract on individual grounds 6% (DARES 2004). There is thus evidence in recent years of a process of bidding up redundancy settlements whereby the employer seeks to negotiate termination of the employee's contract by offering compensation in return for which the employee forgoes the possibility of initiating grievance proceedings. It may be tempting to take the sum on offer rather than await redeployment that may or may not happen. Once again, it has to be noted that employees are not equal in the face of this type of procedure.

The “personalised redeployment agreement” was an attempt to improve the situation of workers made redundant but it was adopted at a time of growth in the numbers of temporary contracts and individual dismissals. The losers of this reform will accordingly be those who, because they have been employed on temporary contract or dismissed on individual grounds, remain beyond the scope of any specific arrangement.

### 3. Transitions on the French labour market

The success of the Danish flexicurity model lies in its management of transitions between employment and unemployment. In a similar vein, the “personalised redeployment agreement” has been given additional means to manage the return to employment of workers made redundant by small and medium-sized firms. This affects, however, only a tiny portion of persons in employment insofar as people most often enter unemployment because their fixed-term contracts have come to an end. This situation gives rise to the question of whether the recruitments on fixed-term contract are a way of finding and entering stable employment (Section 3.1) or whether they are a symptom of a two-speed labour market in France (Section 3.2).

#### 3.1 Transitions outside precarious employment and unemployment

The extent of recourse to temporary employment appears to indicate a tendency on the part of employers to use it as a sort of probationary period in order to select those workers whom they will ultimately wish to keep on. One in three employees recruited on fixed-term contract was in stable employment a year later<fnref n="11" /> (CERC 2005: 96). So is this a stepping stone towards stable employment? The CERC report regards this rate as not insignificant, as does Goux (2000) who considers that temporary contracts are “the privileged instrument of short-term adjustment, but also of the conversion of unstable jobs into stable ones”. To paraphrase the foregoing observations, two thirds of workers still on precarious contract one year later is not insignificant, especially when the average length of a fixed-term contract is limited. Some will

<footnote n="11">¹¹ Transitions between fixed-term contracts in 2000 and open-ended contracts in 2001.</footnote>
continue to be employed on one short contract after another, or will alternate periods of work with spells of unemployment.

In terms of European comparison, the French performance is mediocre. According to the European household panel, only 25% of workers who were in temporary employment<fnref n="12" /> in 1999 had a stable job one year later. Only the Spanish (25%) and Portuguese (10%) performances were comparable, whereas the rate of transition is 50% or more in Austria, Ireland and the Netherlands. It would seem that the French performance has improved in the meantime, since 60% of workers previously on temporary contract had permanent jobs in 2000, whereas the rate remained below 50% in the southern European countries. It is true that at the end of the 1990s the French performance in terms of job creation was above the European average.

In the light of these comparisons, access to temporary employment is shown to represent only a feeble springboard towards permanent employment. It also fuels unemployment since the risk of ending up without a job at all is higher among those who have held temporary jobs (Cancé and Fréchou 2003, Fougère 2003). The rate of exit from unemployment is low in France, the average period of unemployment being more than 16 months, as against 12 for the OECD countries.

The employment prospects of workers on temporary contract are quite poor. Transitions to stable employment are rather weak, and transitions to unemployment more marked, and we have seen that the French performance in terms of exit from unemployment is mediocre. It is therefore hardly surprising to learn that “transitions are experienced negatively” (Gautié 2003) and that the feeling of employment insecurity is particularly marked (Postel Vinay, Saint Martin 2004).

## 3.2 A two-speed labour market?

In a context where labour market transitions have become more frequent in recent decades, it is significant that the average length of seniority has increased in France between 1992 and 2001, having risen from ten to eleven years between these dates. If precarious contracts are developing while average length of service is increasing, it must obviously be the case that the gap between different categories of employee is widening. For example, the difference in the risk of losing one's job, depending on length of service, has greatly increased. Other employee and employment criteria being equal, this probability has increased 3.5-fold since the beginning of the 1970s for those with one year of seniority while it has remained stable for those with ten years' seniority (Gautié 2003).

Age is an important factor in this division. Apart from the high rate of unemployment among young people, their proportion of precarious contracts is also high. This tendency has grown in that more of those who finished their studies in 1998¹³ were recruited on this type of contract than in 1992 (+6 points), even though the state of the economy had improved in the meantime. Those without access to stable employment also encounter difficulties in renting accommodation or in obtaining bank loans or mortgages (CERC 2005).

<footnote n="12">¹² N.B. the field of study is different. The temporary contracts analysed are fixed-term contracts, agency contracts and assisted contracts.</footnote>

<footnote n="13">¹³ The “Génération 98” survey investigates the career paths of all young persons who finished their initial studies in 1998. The “Génération 92” survey did the same for 1992.</footnote>
What is more, the lower young people's level of qualification, the worse their situation. The probability of being unemployed increases and their chances of access to stable employment are reduced. The average period on fixed-term contract before being employed on permanent contract is three months for those with a master's degree and 18 months for those with no qualifications. It would seem then that the temporary contract plays the role of stepping stone to stable employment for the best qualified but not for those who lack qualifications. Generally speaking, qualification is an important component of employment stability. Four times more managerial staff than skilled workers have been in the same firm since the beginning of their career.

The integration of young persons and non-skilled workers into the labour market is thus a crucial problem. Though the law introducing the *convention de reclassement personnalisée* may have improved the situation of redundancy victims, one is bound to point out that large numbers of workers fall outside this arrangement and show a tendency to alternate between periods of precarious work and periods of unemployment.

## 4. Conclusion

The effort on the part of the European institutions to promote policy measures that combine flexibility and security would seem, in France, to come up against a social context marked by strong antagonism between the social partners and by a tendency to favour the law as a problem-solving mechanism. Some components of the measures introduced by the *loi de cohesion sociale* have, nonetheless, sought to associate these two concerns by putting in place an arrangement to assist the victims of redundancies in small and medium-sized firms. A number of comments are appropriate in this connection.

The whole question of redundancies is a particularly explosive subject in France, as shown by the demonstrations held in protest at the new employment contracts proposed by the government in 2006. The idea that firms would remain free to terminate contracts over a relatively long period and without being required to state any grounds for the discontinuation crystallised discontent and forced the government to alter its plans. This further provides an illustration of the tendency to choose essentially legislative solutions to remedy the ills of the labour market. And yet laws tend to come and go without any necessary continuity in their content. These frequent changes in the labour code are a source of legal insecurity and inevitably have an adverse effect upon the efficient operation of the system. Finally, it is important to restore a sense of proportion given the excessive focus on redundancies by the media and the trade unions. The *convention de reclassement personnalisée* is of relevance to only a marginal fraction of French wage- and salary-earners. Apart from the extent of unemployment, the aspects of greatest concern in the French system are precarious employment and labour market transitions and the priority, given this context, must be to implement effective macroeconomic policies that would boost growth and, at the same time, enable the development of stable forms of employment.
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