French labor market reform: an example for Belgium? – Economic policy
While the Belgian federal government falls into doldrums, our neighbors to the south are implementing a startling labor market reform.
In France, when the unemployment rate falls below 9%, as is the current case, the period in which a person can receive unemployment benefits. The reform should raise the employment rate in France above 70%.
In France, when the unemployment rate falls below 9%, as is the current case, the period in which a person can receive unemployment benefits. The reform is supposed to raise France’s employment rate above 70. “My countrymen are unruly Gauls, who don’t want change,” French President Emmanuel Macron said a few years ago. However, its labor minister, Olivier Dussopt, is currently unveiling a major labor market reform. The period during which a person can receive unemployment benefits will be shorter and linked to the economic cycle. Until now, the French could count on unemployment benefits for 24 months. After this time, it will be abandoned. For people over 53, on the other hand, the time limits are longer: depending on age, the duration of benefits is between 30 and 36 months. At the request of President Emmanuel Macron, the period for those under 53 will be reduced by 25% from February. They can receive benefits for 18 months. For those over 55, the period is reduced from 36 to 27 months. This rule applies as long as the unemployment rate in France remains below 9%. If it exceeds this limit, the service duration will increase again. Currently, the French unemployment rate is 7%. The French government gives several reasons for this labor market reform. This is a way of combating the narrowness of the labor market. This measure should encourage the unemployed to find a new job faster. This will reduce the vast reservoir of 3 million French unemployed. It should also make it possible to raise the employment rate in France, which is currently 68%. Currently, 400,000 job vacancies are open in France. Research shows that the unemployed are most likely to look for work within the first four months of unemployment and within six months before benefit entitlement ends. “We want to bring these two stages closer together,” the minister said. Another argument from Olivier Dussopt: “We have one of the most generous unemployment systems in the European Union. In many countries, the duration of benefits is shorter, for example in Italy, Portugal and Germany. ” The French reform contrasted sharply with the Belgian federal government’s own weak will to modernize the labor market. De Croo’s government was weakened by internal disputes. The employment contract he entered into this spring was a fragile beast. The European Commission has recently been harsh on Belgium’s unwillingness to reform. Earlier this year, the OECD, the think tank for Western countries, delivered the same message: labor market structure and pension reforms have great potential for our economy. Based on OECD recommendations, Voka’s chief economist, Bart Van Craeynest, calculated that Belgium’s growth potential could reach 16% of GDP in 2060 thanks to these reforms. In current euros, this represents 55 billion euros. One of these reforms is reducing unemployment benefits over time. Belgium is one of the countries where these benefits can in principle continue to be paid indefinitely. Employment services can penalize unemployed workers, but this is limited. A time limit on benefits was put on the table during government negotiations, but only the Liberals and N-VA were in favor of it. There is no majority for this. However, Belgium could benefit from the new French system. According to the Bureau du Plan, the unemployment rate in Belgium is currently 8%, which, according to the French model, would imply stricter unemployment insurance rules. Another interesting exercise is to see what this means for regions. With an unemployment rate of 5%, Flanders will effectively fall over the threshold and stop benefits faster. On the other hand, in Wallonia (11.9 percent) and Brussels (14.8 percent), where the unemployment rate is higher, it will not be.