June 18, 2019 / 10:55 AM / 4 months ago

France sees over 3 billion euros in savings from tighter jobless benefits, angering unions

PARIS (Reuters) - A planned tightening of jobless benefits in France should save $3.4 billion euros (£3.04 billion) by 2021, the government said on Tuesday, causing shock and fury among unions and prompting one labour leader to threaten street protests.

FILE PHOTO: French Prime Minister Edouard Philippe delivers his second general policy speech at the National Assembly in Paris, France, June 12, 2019. REUTERS/Philippe Wojazer

The announced overhaul of the unemployment insurance system marks a relaunch of President Emmanuel Macron’s reform drive after the yellow-vest protest movement held up an early push to liberalise the economy at the start of his mandate in 2017.

Under the changes, workers will have to work longer to get benefits and payouts to the highest earners will be gradually cut. The new rules bring rights to jobless benefits in line with those in other countries like Britain, the government said.

“With this reform, the number of unemployed people should fall by 150,000-250,000 in the coming three years,” Prime Minister Edouard Philippe told journalists.

“Far from a pure accounting exercise or cost-cutting logic, this overhaul of the unemployment insurance should create savings and transform the labour market, resulting in 3.4 billion euros in savings.”

The savings would benefit the UNEDIC unemployment insurance fund, which is co-managed by employers and unions, but whose debt is guaranteed by the French state.

UNEDIC currently expects a 1.8 billion euro shortfall between what workers and employers pay in and what it pays out to the unemployed. It expects to return to the black in 2021 for first time since 2008.

While imposing tougher conditions for receiving benefits, the overhaul also aims to discourage employers’ use of short term contracts, by requiring higher payroll contributions by firms that use such contracts.

That could impact big staffing companies like ManpowerGroup and Adecco for whom France is a major market on account of French employers’ traditional reliance on short-term contracts to keep their workforces flexible.

The government decided to push ahead with the reform, which is to be enacted by decree in the coming months, after unions and employers failed to negotiate a deal delivering major savings.

Laurent Berger, head of the centrist CFDT union, France’s largest, said after the government presented its proposals that he was “deeply angered and stunned”.

Catherine Perret, an official with the militant CGT union, said there were no surprises in the proposals though they represented a major tightening of unemployment benefits.

“The only way we are going to be able to get the government to change course is to hit the streets” in protest, she told journalists.

The new rules would require a person to work at least six months over the last 24 months to be eligible for benefits, compared with four months on the job over the last 28 months currently.

Workers with a gross monthly salary of 4,500 euros will see their benefits cut from their seventh month on unemployment, whereas currently the jobless get benefits for two years, or three if they are over 55 years old.

Writing by Leigh Thomas; Editing by Michel Rose and Mark Heinrich

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