The last two days have been spent by the new French government meeting and talking with what in France are known as the “social partners”. This expression, strange to Anglo-Saxon ears, has been commented on by me in an earlier incarnation of this blog here. The importance of the social partners, both for the governing of various aspects of the French economy and labour market and in the national psyche itself, should not be underestimated. So why has the government spent two days in closed door sessions with them, and what could be the result of these discussions?
The Grand Social Conference (to give it its full, PR-contrived name) was a key part of François Hollande’s election manifesto. It was his response to many difficult questions about the detail of his economic and social policy. His stock response was to say that such matters should be discussed by the social partners in such conference. This was both an easy answer in a difficult spot (and was often derided as facile by the more activist Nicolas Sarkozy) but also part of a genuine belief that reforms would have to be prepared in order to succeed. The government’s fundamental belief, which explains the need for the Conference, is that the country cannot be governed solely by political power. This view could be seen as either realistic or passive, depending on whether you view the role of the social partners in economic and social matters, such as the functioning of the social security system or collective bargaining, as positive or negative. Let’s be kind and consider it realistic, at least for the time being.
The attitude of the social partners prior to the Conference was largely skeptical. Unions were wary of being seen to kowtow too early to the new government, whilst employers’ organisations were feeling bruised after a campaign during which they were largely the object of hate (in the most extreme cases) or ridicule (in the most friendly). The conference was preceded by a strange exercise several weeks ago whereby the timetable and agenda of the conference itself was the subject of a mini-conference with all parties. This appears to have ensured that everybody was in agreement about what would and would not be discussed, and therefore how much could come out of the conference into short-term. This exercise size looked faintly ridiculous when it was conducted (and was derided by the right as an example of the government’s dithering) but the broad satisfaction of all parties yesterday would suggest that it worked.
So what happens now? The details will have to be worked out in a series of working groups starting this summer. Interestingly, the priority that has emerged from the Conference is not what was trailed in the campaign by Hollande; instead, competitiveness now seems to be king. Given that the Socialists had vehemently opposed the raising of VAT to offset employers’ Social Security contributions (a Sarkozy policy that is in the process of being dismantled) in an effort to lower French employers’ costs and make the country more competitive, the government wants to find some way of lowering those costs. That somewhere is likely to be the CSG (a type of national insurance, for English ears, or employers’ payroll tax, for Americans). The CSG has the advantage of being slightly more progressive than VAT (lower wage workers pay a reduced rate), however the absence of any discussion of its increase during the campaign will expose Hollande to accusations that he has willfully hidden the bad news from the French until after moving into his Elysée Palace office.
Other important issues were also broadly agreed upon by the social partners: steps to promote and ensure equality between men and women in the workplace, shareholders’ powers to veto abnormal executive pay packages and new means of financing top-up pension systems which the social partners themselves operate.
The thorny issue of the minimum wage however continues to divide employers’ and employees’ representatives. The Prime Minister, Jean-Marc Ayrault, has already announced a slightly-above-inflation increase of 2% to kick in from the beginning of July. Unions were hoping for boost above and beyond the rate of inflation – the boost here amounts to 0.6%, or about 30 euros a month for the full-time worker. Peanuts. Employers’ representatives had protested that rising minimum wages were an unbearable pressure on the smallest businesses, who could not keep up with the rising costs of employing people. Add to that the increasing encroachment of the minimum wage in the labour market for those at the lower end of the pay scale (the so-called “smicardisation” of workers, after the French name for the minimum wage, the “Smic”). Hollande had sought to deflect this issue (there’s that tactic again) during the campaign by arguing that he wanted to see everybody’s wages rise, and not simply those at the bottom. That would require a widespread renegotiation of wage scales in collective-bargaining agreements. This is something that employers’ organisations are open to (many of the scales used are ridiculously out of date). Happily, French employers also seem to be more focused on how much money they pay the government rather than their own employees. Little about this wholesale renegotiation has filtered out of the Conference, and it will continue to dog the government in the face of working-class frustration at it the miserly pay that many employees suffer throughout their entire working lives.
This week’s Conference has gone better than many probably would have suspected, including in the government. Volatile unions are always prepared to go rogue if they feel the need to signal dissent to their members (particularly during difficult succession battles such as within the Communist-sympathising CGT). The agreements in principle on lots of issues, coupled with the lack of any genuinely divisive policy decisions have left the right struggling to oppose much at all. Engaged in a circular firing squad of a leadership campaign, the UMP is paying attention to anything but the plight of the French people. That will not last forever. The challenge for the government will now be to ensure that concrete measures that must eventually be taken from this laudable but time-consuming exercise.