Unemployment in France. Down, down

More jobs, but few in the private sector

AMID the prevailing gloom in France, some cheerful news has begun to trickle out. Unemployment fell for the sixth month in a row in November. At 9.6%, it is still woefully high, and well above the euro-zone average of 8.3% (unemployment also fell sharply in Germany in November). But economists reckon it could drop below the significant level of 9% by the end of 2006--a level not reached since 2002.

What explains this fall? Only a small part is due to economic growth. The economy expanded by just 1.5% in the first three quarters of 2005, and may do little better in 2006. This has yielded some new jobs: in 2005, nearly 60,000 more jobs were created than lost in the non-farm private sector, after a flat year in 2004. A new two-year job contract has also helped. Introduced by Dominique de Villepin, the centre-right prime minister, it gives employers of fewer than 20 workers more flexibility. These firms use this contract for roughly one in ten of the new jobs they create.

A second explanation is demographic. France has one of Europe's highest birth rates, but its population is nonetheless ageing. With baby-boomers beginning to retire, and fewer leaving school, the number seeking work is now dwindling. Some 29,000 more newcomers will come to the labour market than retire this year, around a quarter as many as in 2004.

The biggest reason for the falling jobless figures, however, is social policy. As the chart shows, the number of new subsidised jobs set up under the government's "social cohesion" plan began to swell in late 2005. In the first half of this year, INSEE, the official statistics body, forecasts that, out of a total of 100,000 new jobs, one-third will be in the private sector, another third in the bureaucracy and the remaining third will be state-subsidised. This last category of jobs varies from positions in voluntary organisations and town halls to schools and sports clubs.

At the same time, the government has clamped down on unemployment benefit. All long-term unemployed young people have been called in for interviews, to be placed on job or training schemes. Anybody who is long-term out of work and accepts a job gets a euro1,000 bonus. All benefit claimants are now required to sign on more regularly than before. These measures have helped to improve the unemployment figures.

If the fall in joblessness is partly engineered, it remains, at least in the short run, politically astute. Job insecurity and worries about competition from lower-wage countries have been a main cause of France's sagging morale, and its rejection of the European Union's constitution last year. Indeed, although Mr de Villepin will claim credit for better job figures in the months ahead, many of the measures were actually put in place before he took office, by Jean-Louis Borloo, the "social cohesion" minister.

The need to deal with joblessness became more acute after the recent riots in the suburbs. This week, the government lifted the state of emergency, imposed to curb the violence, after only 425 vehicles were burned on New Year's Eve--a number considered relatively normal. Getting residents of public housing projects into work is more urgent than ever.

The great missing element, however, remains private-sector job-creation. The obstacles are well documented: complicated rules for laying off workers, high social charges for employers, strict working-time rules and a high minimum wage. The new two-year job contract helps a bit, though only for small firms. Some other ideas are on the table. President Jacques Chirac is talking of shifting the financing of the benefit system away from the payroll tax. "Because it weighs too exclusively on wages," he said this week, "the system of financing social protection works against jobs."

The solution is less clear. Mr Chirac mentioned a value-added employers' charge. Others have talked of a social VAT. Yet Mr Chirac's past new-year promises have often turned out to be empty. As he approaches his 11th anniversary this spring, and with a presidential election due in 2007, nobody any longer holds out hope of serious labour-market reform.

Article analyses the decreasing unemployment rate in France and concludes that only a small proportion are non-subsidised jobs in the private sector.