Fewer rights and greater precarity following unemployment-insurance reform in France

Apr 3rd, 2020
Claire Vivès

Quick! Are there other lives?
— Sleep in wealth is impossible.

Wealth has always been public property.

~ Arthur Rimbaud, “A Season in Hell”

*** traduction en français ci-dessus***

Across France, huge numbers of people are taking to the streets to push for the withdrawal of the proposed pension reform. Meanwhile another reform was adopted just a few months earlier. While these unemployment-insurance cuts attracted less attention, they represents a similarly flagrant attack on workers’ rights.

 

Since 5 December 2019, huge numbers of people from all walks of life have been taking to the streets across France to push for the withdrawal of the proposed pension reform. A reform targeting another aspect of social protection, unemployment insurance, was adopted just a few months earlier. While this one attracted less attention, it represents a similarly flagrant attack on workers’ rights and is shaped by the same philosophy that is behind other projects to transform the French social protection system, including the pension reform.

By forging an even stronger link between the level and duration of workers’ contributions and the amount of the benefits to which workers are entitled, both of these reforms replicate in the area of social protection rights inequalities already experienced in the employment arena. Besides having repercussions for workers’ income during periods of unemployment and in retirement, these changes reinforce workers’ subjugation to and dependence on employment, thereby running counter to the emancipatory intentions of social security.

Some historical background to aid understanding of the scope of the 2019 reform

Until a joint insurance scheme was established in 1958, unemployed people in France received some support from assistance systems. This support was awarded on the basis of their resources and their family situations. It was only in 1958 that an insurance-based system – so called because it gave all unemployed people the right to benefits as long as they had paid into the system in the past[1] – was introduced.

The state delegated responsibility for covering the risk to trade unions and employers’ organisations, meaning that the unemployment-insurance system is managed by the social partners. The national unemployment-insurance entity Unédic (Union pour l’emploi dans l’industrie et le commerce – National Professional Union for Employment in Industry and Trade) is administered by an equal number of representatives of trade unions and employers’ organisations, bodies that together determine the conditions for contributions and compensation in their negotiations on unemployment insurance. In between negotiations, they administer Unédic. The state has supervisory power over the system, most notably because the agreements negotiated by the social partners cannot enter into force unless they are approved by the state.

Due to the structure of trade unions and employers’ organisations in France, the balance of representation works out in the employers’ favour. Three employers’ organisations sit on Unédic, with the French Business Confederation[2](MEDEF), which has three of the five employer votes, having the most clout. On the other side of the table, there are five trade unions, each of which has one of the five trade-union votes. In practice, all the employers need to do to ensure that a text is adopted is to seek one trade union to team up with. While the employers’ disproportionate influence has been a problem since Unédic’s foundation, it must be pointed out that the 2019 reform and the accompanying swingeing cuts to unemployed people’s rights were the result of a government decision that consciously wrested control of the system from trade unions and employers’ organisations.

After Unédic was set up, negotiations were held every two or three years. Following repeated requests from the executive, there was a gear change from 2017 onwards, leading to the social partners being embroiled in almost relentless negotiations. In 2019, the government asked the social partners to open a new round of negotiations. This request was accompanied by an extremely restrictive guidance letter laying out the conditions for the negotiations, under which any resulting agreement was expected to generate annual savings of €1.3 billion over three years.

No agreement was reached. On the revenue side, the employers once again refused to increase contributions, as they have done for 20 years, whereas on the expenditure side, no organisation agreed to endorse the radical curtailment of unemployed people’s rights that would be required to comply with the guidelines set out in the government’s letter.

When negotiations failed, the government took over and acted by decree, meaning that the text was never discussed in parliament. Some of its provisions came into force on 1 November 2019, while others will do so on 1 April 2020.

Saving money by reducing unemployed people’s rights

As illustrated by the guidance letter, the primary purpose of this reform is to save money. While the reform is not described at length here, this article will highlight its main provisions with regard to the savings made. There is no need to comment on the introduction of a measure reducing, from the seventh month of unemployment, the benefits paid to people whose previous gross monthly salaries were €4,500 or more. While this measure is highly symbolic, it has little impact in terms of the savings it generates.

The decree’s first component, which came into force on 1 November 2019, entails imposing stricter limits on access to unemployment benefits. To be entitled to benefits, workers must now have paid more contributions (six months’ worth, instead of four) over a shorter period (24 months rather than 28). ‘Renewable rights’ have been scrapped too. Instituted in 2014, ‘renewable rights’ entailed a system of preferential entitlement that allowed claimants who had worked while receiving benefits to qualify again after contributing for one month (rather than four). To understand the devastating effects of this new, stricter approach, we need only recall that many jobseekers were unable to claim benefits even before the reform’s introduction, with more than one in two jobseekers being ineligible for benefits.

The decree’s second component, which will come into force on 1 April 2020, involves amending the wage-calculation methods used to calculate the amount of benefit due, resulting in lower benefits for precarious workers. Although the change made is purely technical, it is highly significant. Previously, when a claimant registered as unemployed, their daily reference wage was calculated by adding together the sum of all wages received over the reference period and dividing it by the number of days worked over that period. While reference income is still calculated by adding together the sum of all wages received over the reference period, this figure is now divided by the total number of days in that period, thereby representing a shift from a reference wage to a reference income. This automatically results in a lower reference income, to which the same income-replacement rate is applied as before. This change will not affect people who register as unemployed after a continuous period of employment, but it will drastically lower the benefits paid to precarious workers. And this is precisely what the executive is trying to do.

As illustrated above, these two regulatory changes have the effect of restricting precarious workers’ access to benefits and reducing the amounts payable to them, making their situation even more unstable. Whereas unemployment insurance previously enabled them to supplement the income they earned from low-paying jobs, the new calculation rules place them under considerable pressure to work all the time, even if it means accepting very poor-quality jobs.

Fighting precarity with more precarity

Spending cuts are not the only result the executive hopes to achieve with this reform. The government claims that the reform is also intended to fight precarity.

For around 20 years now, the role of unemployment insurance has evolved as the face of employment has changed. While the overall share of fixed-term and temporary contracts in total paid employment has been stable since the 2000s, short-term contracts are becoming ever shorter. As a result, more and more workers are employed and unemployed at the same time, or are constantly switching between employment and unemployment. As a result, their income is made up of both wages and unemployment benefits. Unemployment insurance, which originally served as replacement income for people who lost their jobs, has now become a form of supplementary income for workers in discontinuous employment. In 2017, about half of all benefit claimants worked, and around one in four claimants received both wages and benefits (Unédic).

For many years now, the burning question has been this: does the existence of a form of supplementary income make these poorly paid jobs acceptable, and has it facilitated their spread? This is by no means an easy question to answer, yet the government has not even made the effort to try, especially when it comes to support measures. In the executive’s view, unemployment insurance is the reason for the rise in job insecurity – and the solution lies mainly in penalising people who receive both wages and benefits. Without discussing this issue in depth here, it is important to highlight the hypocrisy of claiming to fight precarity after adopting various amendments to the Labour Code that have made it far easier for employers to create precarious jobs.

The unemployment-insurance reform uses two tools to serve its stated objective of combating precarity. Firstly, it creates a bonus-and-penalty system based on a variant of the ‘polluter pays’ principle: companies’ contributions are adjusted based on the cost they generate for the unemployment-insurance system. In the field of social security as in the environmental domain, the idea that an entity can, in effect, purchase the right to pollute or employ staff on short-term contracts is highly dubious. The ‘penalties’ are particularly ludicrous in this specific case given the limited number of companies concerned (the system only applies to companies employing more than 11 people and operating in one of seven areas of activity – and, of course, some companies’ contributions will be adjusted downwards) and the low level of the surcharge (maximum increase of less than 1%).

Secondly, benefit claimants who work are facing a slash in their benefits. They are currently coming under fire for ‘making strategic use of unemployment benefits’, and yet for many years now, measures have been taken with the specific aim of encouraging people to go back to work by relaxing the conditions for receiving benefits while earning a wage. And even with these incentives, benefit claimants are hardly living the luxurious lives insinuated by the French government, given that between their wages and their benefits, they earn an average of just €1,240 a month. The consequences of the new calculation method (see above) are clear: it will cut people’s benefits and penalise them for any period when they are out of work, forcing them to accept any job they can find.

In other words, the reform is fighting precarity with more precarity, both by tightening up eligibility conditions, which will delay or even block access to benefits for the most vulnerable in society, and by reducing the amount of benefits paid to people who switch between employment and unemployment because they can only find short-term work.

A reform consistent with broader changes to the French social-protection system

More broadly, this reform is significant when viewed in conjunction with the changes the French social-protection system is currently undergoing. A comparison with the pension reform is especially illuminating in this regard.

If the proposed pension reform were adopted, these two reforms would penalise unemployed people and precarious workers twice over. As the pension reform would mean that workers’ entire careers would be used as the basis for calculating their pensions, it would disadvantage workers who have been unemployed at any point in their careers. Furthermore, the rules for counting periods of unemployment would also be less favourable to unemployed people. Firstly, the reform would abolish some of the rules that made it possible for unemployed people to count as periods of employment quarters in which they paid contributions while unemployed. Secondly, pensions were previously calculated based on the wage that served as the basis for calculating unemployment benefit, whereas the pension reform would see the amount of the benefit itself being used as the basis for calculating the pension.

Not only do the two reforms reinforce one another, they also share the characteristic of forging a stronger link between the contributions a worker pays and the benefits they receive. This has reflected a general trend in unemployment insurance since the 2000s whereby the length of time for which claimants can receive unemployment benefits has become ever more closely tied to the length of time for which they paid contributions. The pension reform substantially strengthens the link between contributions and benefits as it seeks to institute a new points-based system that would see workers accumulate points in the course of their careers and would mean that each euro of income received would be reflected in an equivalent level of pension payment. Although the resources paid into the pension and unemployment-insurance systems are pooled resources, the way the relevant benefits work bears an ever closer resemblance to a personal savings scheme. To justify its approach, the government trots out a maxim it portrays as being beyond dispute, namely “the same benefits for the same work”. Under the new rules, now more than ever before, people who had good jobs will be paid good unemployment benefits and pensions, while people who had poor jobs will receive poor unemployment benefits and pensions.

This purely contribution-based approach not only replicates the inequalities experienced in employment, it also generates further inequalities in social protection. The very same people who are penalised by the unemployment-insurance reform for not having a stable job will also be condemned to receiving a low pension under the contribution-linked points-based pension system.

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Although consistent with previous reforms, the unemployment-insurance reform, through the sheer scale of its assault on unemployed peoples’ rights, constitutes a turning point in the history of unemployment insurance. Its effects are entirely predictable: it will penalise the most precarious jobseekers and workers. In its study on the impact of the reform, Unédic highlighted the fact that young people would be the most severely affected because they switch between employment and unemployment more than any other group. Generally speaking, by removing some workers’ entitlement to benefits and/or reducing the amount to which they are entitled, the reform will impoverish households that, if not already poor, are in extreme danger of sliding into poverty. The reform also risks pushing up the numbers of those who do not actually claim the benefits to which they are entitled, as potential claimants may prefer to go without their very limited benefits rather than having to face rounds of administrative constraints, obligations and checks

More broadly, under the unemployment-insurance reform – and the proposed pension reform – any period in which somebody is out of work reduces the amount of benefit to which they are entitled. To take just one example, these reforms make it far more risky and expensive for workers to retrain, as they often rely on unemployment insurance to be able to afford to do so. This has the overall effect of transforming social protection from a tool emancipating workers from the labour market into a mechanism that further subjugates unemployed people and precarious workers to employment. As such, its effects will be felt by all workers, who may feel they are at the labour market’s mercy more than ever before.

Update: This text was written before confinement and economic assistance measures were taken by the French government in response to the COVID-19 pandemic. Among the measures thus far taken, one calls for a suspension until September of the measures previously planned to take effect on April 1st. This suspension has already sparked two reactions.

First, the suspension of entry into force because of economic crisis is a lesser evil confirming that, for the instigators of this reform, those who are on unemployment are so of their own volition and are not making necessary efforts to find whatever jobs might have been available. Second, this suspension is the only measure thus far designed for precarious workers (with the exception of the prolongation of rights during the confinement period for those whose unemployment ended on March 1st).

In effect, the government has taken no exceptional measures on behalf of the unemployed; it has not revisited the measures entered into force last November 1st, and its partial unemployment coverage cannot cover the income lost by people on short-term contracts. Already strongly mistreated by the recent reforms, the most precarious are thus newly affected and left without protection, obliged to submit themselves to the demands of the labour market, which could, in this difficult period, perhaps even threaten their lives.

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Claire Vivès is a sociologist and an expert on the links between employment and social protection and the public employment service. Her work focuses on ways in which unemployment-insurance entitlement has evolved in light of the changing face of employment and, more generally, on job-security policies. She studies both regulatory developments and their significance and workers’ career paths and lived experiences.

 

[1] The contribution requirement was very flexible, as it was enough to have contributed for three months. The primary purpose of the requirement was to check that unemployed people had actually been employed.

[2] The French Business Confederation (MEDEF) is the most powerful employers’ organisation in France, not only having the largest number of member companies but also representing the country’s biggest companies.