For France’s Jobless, Macron Aims to ‘Make Work Pay’

PARIS — Franck Provost, a high-profile coiffeur with more than 500 hair salons across France, needed to do some hiring last fall in the central Loire region. But when an associate reached out to 130 unemployed stylists, he said, only two replied.

“There are thousands of hairstylists on the jobless rolls, but we can’t hire them,” Mr. Provost told French television. “Our main competitor is the unemployment office.”

His lament is common among French employers: The nation’s unemployment system, they say, with its lengthy and generous payouts, can sometimes be more attractive than work.

France’s powerful labor unions vigorously dispute that. Yet as President Emmanuel Macron revives an ambitious program to overhaul the French economy in the wake of the so-called Yellow Vest protests, he is aiming at a once-untouchable totem.

Vowing to “make work pay,” Mr. Macron is preparing executive orders to force through changes to push the unemployed back into the labor market — including the 20 percent who receive benefits that exceed what they were paid while working, according to a government estimate.

Mr. Macron will require a longer work history to qualify for benefits. Welfare checks for previously high-salaried employees will be capped. And in a bid to reduce the number of unemployment claims, companies that rely on short-term contracts will be penalized with higher payroll taxes.

The plans are already facing a public outcry. Labor unions held modest street demonstrations in Paris last month, saying the changes would make already struggling job seekers more vulnerable. Organizations representing employers like Bouygues, France’s biggest construction company, and Adecco Group, the temporary-employment agency, denounced the crackdown on flexible contracts, which they consider vital for businesses.

And economists say the overhaul will only tweak the current system around the edges, making it doubtful that one of Mr. Macron’s signature economic efforts will amount to much.

“At a time when employers are complaining of a labor shortage, there is nothing in here to encourage the unemployed to get back to work,” said Patrick Artus, chief economist at Natixis, a Paris-based bank. “There’s no big change that will lead to people preferring to have a job over benefits.”

Mr. Macron is taking advantage of an apparent lull in the Yellow Vest protests to revive his economic agenda, as public support for the movement slumps after seven months of often violent demonstrations against rising inequality in France. After holding town meetings and granting new tax cuts to the working class, he has rescued his approval ratings from a deep slide.

The president’s moves to seed economic dynamism reflect a pivot back toward a Nordic-style labor model, known as “flexible security.” The government altered France’s strict labor code last year to create more flexibility for companies to hire and fire, and is shoring up a national system of training and support to help workers make a transition to new jobs.

There are signs that some of the measures may be working. The economy generated 90,000 new jobs in the first quarter, and unemployment fell to 8.7 percent — the lowest in a decade, though nearly triple Germany’s rate.

Employers, meanwhile, are complaining of labor shortages. Over 330,000 jobs are unfilled, according to the government, as companies scramble to find programmers, electricians and other workers with valuable skills. Mr. Macron drew widespread anger last year when he lectured an out-of-work gardener in Paris to look harder for a job, an exchange that went viral on social media.

Altering the unemployment system is part of what Mr. Macron is calling “Act 2” of his presidency, after the changes to France’s rigid labor laws during his first year in office in 2017. Under the new measures, jobless benefits will be expanded to some people who for the most part were not previously eligible: the self-employed and those who quit jobs to change careers. The government says the shift is intended to encourage entrepreneurship and job flexibility.

At the same time, the government will tighten the rules for receiving benefits to prompt people to return the labor market more quickly.

Currently, people on short-term contracts, whether a hairdresser or a theater worker whose play has ended, can receive unemployment benefits for a period equivalent to the number of months worked. Other workers who have held a job for five or more years can get benefits for up to two years (or three years for those over 55).

Under Mr. Macron’s plan, people will need to have worked for six of the last 24 months to qualify for unemployment benefits. For those earning in the top 10 percent, who can get up to 7,700 euros (about $8,700) a month in benefits, the payments will drop by 30 percent after six months.

A previously passed measure will cap benefits for job seekers who reject more than two “reasonable” job offers, even if they are overqualified for the positions.

“The idea is to change the rules so that working always pays more than not working,” Prime Minister Édouard Philippe told lawmakers last month.

The government expects that the program will save €3.4 billion, or about $3.9 billion, and get up to 250,000 people off the unemployment rolls — helping Mr. Macron achieve a campaign pledge of lowering unemployment to 7 percent by the next presidential election in 2021.

But economists say the pay difference in many cases won’t be enough to encourage people to take jobs available through France’s unemployment offices, which tend to pay close to the gross monthly minimum wage of €1,521. France’s unemployed receive an average of €1,000 a month.

And short-term contracts that throw people back into unemployment may still abound, despite the higher payroll tax. The tax would apply to seven sectors, including restaurants, hotels and transportation, in hopes of getting companies to switch to permanent contracts. But some industries that are rife with temporary contracts, including construction, will be exempt.

“The fact that it doesn’t apply directly to companies that abuse short-term contracts misses the bull’s-eye,” said Éric Heyer, the director of analysis and forecasting at the French Economic Observatory. “It’s hard to say this will lead to better job creation.”

Blaise Kaniki, a 37-year-old salesman who said he had been working on an endless cycle of temporary contracts at retailers for years, saw little hope in the new measures.

“I’ll have to work more to have unemployment benefits, but that won’t get me a permanent contract,” he said. “Macron’s reform is not going to revolutionize anything.”

French unions are calling for street protests when Mr. Macron pushes the measures through in the summer.

“The government is saying this is about fighting against precariousness,” Laurent Berger, the head of the moderate union, the French Democratic Confederation of Labor, said on French radio. “That’s a lie — it’s a fight against the precarious.”