Jean Pisani-Ferry, a professor of economics at Science Po in Paris and the Hertie School of Governance in Berlin, advised French President Emmanuel Macron during his election campaign. He is widely regarded as the “eminence grise” behind Macron’s controversial labor market reforms. In a recent interview with WorldPost editor in chief Nathan Gardels, Pisani-Ferry argued the reforms are necessary to revive French vitality and foster a deeper integration of Europe.
WorldPost: Some have referred to Macron’s labor reforms as adopting the so-called “Nordic model” in France. That model entails a less rigid, more liberalized labor market in terms of hiring and firing to accord with market dynamism but a stronger safety net for those whose employment has been “disrupted” — something that will become more common in the perpetually innovating, knowledge-driven economy of the future. Can you describe the key elements of the reform and their aims?
Jean Pisani-Ferry: That is a fair characterization. The reforms currently under discussion combine a broadening of the access to unemployment insurance that would eventually turn it into a universal safety net for all those suffering an income drop as a consequence of economic disruption, irrespective of their status. Furthermore, it should be accessible, under certain qualifying criteria, to employees who have resigned from a job to look for another one.
In the traditional French system, unemployment insurance is reserved for employees who have contributed for a minimum period. It is a sort of mandatory insurance and is attached to the wage-earner status. Such an approach is increasingly outdated in the gig economy: a growing number of people move from employee to independent status and back, or they combine different statuses at the same time. Hence the need for universalization and its corollary, strict eligibility conditions.
So these reforms involve a change of philosophy. If successful, they may put us on track toward an economy that combines flexibility and worker protection.
WorldPost: This model works well in the Nordic countries because labor unions are less hostile to business and more collaborative when it comes to innovation that enhances productivity. Is the French labor culture up to this change?
Pisani-Ferry: Not all labor unions are hostile to business and even those that are hostile to capitalism often enter into agreements at the company level, whereas they reject them at the national level. Furthermore, unions are not the only ones to blame. Compared to Germany, for example, French employers are often less willing to give a voice to their employees. So our adversarial industrial relations culture is no doubt there, but it is less universal or less antagonistic than sometimes thought. In any case, things must change, which is the aim of the reforms.
WorldPost: How do you respond to the criticism of those who argue that reform is really aimed at making the French labor market “more American” and that it will just create an insecure precariat and gig economy like in the United States, where more and more people work in mini-jobs with no benefits or long-term security?
Pisani-Ferry: We have already become more American. Job security has diminished, and the gig economy is already here. Blame digital technology, deindustrialization, globalization — you name it. The risk now is that dualism becomes entrenched, with secure, well-paid jobs at one end and precarious, low-paid jobs at the other end. The consequences for the young and those who have lost good jobs are terrible because a fixed-term contract also excludes you from the housing and credit market. That’s not the type of society we should aim for. Nor is it the sort of economy that would foster the acquisition of skills and productivity gains.
WorldPost: Are you confident all these reforms will be passed and implemented?
Pisani-Ferry: The first batch of reforms — those dealing with union representation, collective negotiation and dismissal provisions — are already part of the legislation. That battle is over. We’ll see gradually what impact they have. I do not expect the second batch of reforms on unemployment insurance and professional training and apprenticeship to be blocked either. There will be tough discussions, but these are business-to-business matters, not subjects that mobilize citizens.
The next step, starting next year, will be pension reform, again with the aim of creating a universal pension system that favors transparency, predictability and mobility. This is fairly ambitious but in my view an essential reform because our fragmented and opaque pension system epitomizes inequality of rights among citizens and the many obstacles there are to freedom of choice for participants in the labor force.
WorldPost: In a sense, the Macron proposals follow the reforms of former Social Democratic Chancellor Gerhard Schroeder in Germany over a decade ago that helped the country move from being “the sick man of Europe” to the most robust and prosperous. If the French economy and German economy are more structurally aligned, the core of Europe will be strengthened and Europe as a whole will be more globally competitive. Is this the secondary aim of the reforms? What are the prospects?
Pisani-Ferry: The purpose of reforms is first and foremost to improve the function of the French labor market and the French economy. That being said, reforms in France also have spillover effects on the rest of the eurozone, because France is a large country. So a welcome side effect of domestic reforms is that they make the whole eurozone work better.
Now, it is true that reforms in France are widely regarded as a precondition to deeper discussions on the future of the eurozone, particularly with our German neighbors. And a more integrated Europe is very much part of President Macron’s vision. He has challenged the status quo in Europe by calling for a common European Union defense fund, tax harmonization and a joint eurozone budget. By doing his part to get the French house in order, Macron intends to dispel common and poisonous suspicions in Germany that France and other member states hope to solve their problems with German money instead of domestic sweat. Removing that suspicion by actions instead of words is at the heart of Macron’s European strategy.