The Surprising French Employment Performance: What Lessons?

31 Pages Posted: 12 Nov 2003

See all articles by Jean Pisani-Ferry

Jean Pisani-Ferry

Hertie School of Governance; French Prime Minister’s office

Date Written: November 2003

Abstract

Although widely regarded as a textbook case of a rigid economy, in the late 1990s France was able to increase employment by 10 per cent within five years and to cut down unemployment by more than a fourth. This paper investigates what factors may account for this surprising performance. The evidence suggests a significant shift in the demand for labour that can be partially ascribed to cuts in social security contributions introduced in the 1990s and to the later move to a 35-hour work week. Although a large proportion of companies reported difficulties in hiring, the sharp reduction in unemployment did not result in significant wage pressure. Nevertheless, new measures aiming at fostering labour supply were introduced in the early 2000s. The emphasis on stimulating labour demand that characterised French labour market policies in the 1990s was more successful than expected by observers. This lends support to the advocates of active labour market policies. However, the budgetary cost of this approach has also been high. Whether this strategy is sustainable in the medium run is likely to become increasingly an issue.

JEL Classification: J48, J68

Suggested Citation

Pisani-Ferry, Jean, The Surprising French Employment Performance: What Lessons? (November 2003). CESifo Working Paper Series No. 1078. Available at SSRN: https://ssrn.com/abstract=466562

Jean Pisani-Ferry (Contact Author)

Hertie School of Governance ( email )

Schlossplatz 1
Berlin, 10178
Germany

French Prime Minister’s office ( email )

Paris
France

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