French Vote Offers Opposing Visions Of Job Policy

France's presidential election pits two visions of how to cut one of Europe's highest jobless rates

France's presidential election pits two visions of how to cut one of Europe's highest jobless rates, giving voters a choice of more freedom or more security.

Conservative Nicolas Sarkozy has told voters, who regularly rate the labour market as their top concern, that he can deliver full employment within five years with radical measures which would make people keener to work and firms keener to hire.

His Socialist rival, Segolene Royal, is also keen to tackle rising job insecurity caused by globalisation and is proposing measures which extend the scope of protection offered to workers and encourage companies to hire unqualified school leavers.

Critics of Sarkozy's measures say his plans would hurt the weakest in society, but his proposals are closer to the reforms which international think-tanks and economists say would most effectively address the labour market's structural problems.

"From a purely economic viewpoint, flexibility is more important than security right now given France's situation," said Erik Nielsen, economist at Goldman Sachs in London.

"For long-term growth, you need to make the labour market more inclusive so that you have a bigger active labour force and Sarkozy has not touched enough on this. But flexibility is the biggest missing link in the French labour market " he added.

TIGHT PROTECTION

Huge controversy currently surrounds France's jobless rate but most agree it is somewhere between 8.3 and 8.8 percent. Even if you err on the low side, that makes it the fifth highest in the European Union.

Partly to blame are France's employment protection laws.

They are the most restrictive of any member of the Group of Seven leading industrial nations, according to the Organisation of Economic Cooperation and Development, and the sixth most restrictive in the 30-member OECD.

This crimps jobs creation at a time when the euro zone's second biggest economy is as exposed as any other nation to the restructuring and job losses which result from the increasing mobility of capital, goods and services.

"Very successful European economies put an emphasis on supporting workers, helping them find alternatives if they face job losses, and creating the conditions that ensure new jobs are available," said Barbara Gerstenberger, coordinator of the European Monitoring Centre on Change in Dublin.

"What these countries are not doing is preventing firms from adapting to changing circumstances. This cannot and should not be the case."

The results of such policies are clear in the centre's latest report, which shows France shed 24,439 jobs and created only 16,964 jobs in the first quarter. Over the same period, Britain shed 11,949 jobs and created 53,097.

Royal wants existing jobs to remain in France. She plans to make state aid to firms conditional on pledges not to shed staff as long as the firm is making substantial profits and insists aid would have to be repaid if the firm later relocates abroad.

MAKING WORK PAY

However, Sarkozy says he can change the situation by making work pay, for example by exempting overtime from all tax and social charges so that the 35-hour work week into a minimum rather than a maximum.

He also plans to replace the various types of job contracts with a single one which gives employees more rights the longer they work for a firm and wants people to lose benefit rights if they turn down more than two jobs which match their skills.

"Sarkozy's programme attacks the problems at their root and is not just a redistribution of resources," said Francois-Xavier Chevallier, head of strategy at CM-CIC Securities, said.

Royal wants to extend the 35-hour week to small firms, apply stricter limits on overtime, hike the monthly minimum wage to 1,500 euros over five years, and abolish the CNE job contract that allows small firms to hire and fire workers more easily.

She plans to encourage small firms to hire unqualified school leavers by promising that the state will pay all wages and social charges for a year.

Such measures are targeted at cutting youth unemployment which is about two and a half times the national rate and while they may risk boosting spending to the detriment of the budget deficit, they could be appropriate, according to some analysts.

"If you think the structural unemployment rate is around 9 percent, as some say, then Sarkozy's policies are the best adapted to the situation," said Erik Heyer, deputy director at the OFCE think tank.

"But if you believe, as I do, that the structural unemployment rate is 7 percent, then Royal's policies are better for now and then five years down the line you can look at doing something more structural."