Article published in the EU Reporter on February 13, 2006.
By announcing on 16 January new labour market reforms, Prime Minister Dominique de Villepin has incited dispute among his opponents on the precariousness of employment in France. Thus, Sergio Coronado, the Greens spokesperson comments “The door is from now on open to total precariousness for young people, already touched hard by unemployment. From now on young people will not benefit from the same rights as other employees when they are engaged. “Beyond the `loud declarations’, it is important to wonder whether the quasi ban on dismissal in France does not at least partly explain the rate of unemployment record of 23% among young people under 25.
The limits to the right to dismiss for employers are numerous in France and trade unions like a number of politicians think that they support the struggle against precariousness and ensure occupational safety for all employees. None of whom realise that complete freedom to fire supports the rise of employment and that it is particularly advantageous to inexperienced young people.
How is this possible? In a market economy, the employer is not the master of his employees in the sense that he must simply buy work services in order to produce goods which he hopes to sell to consumers, at the price which they will be ready to pay. It is them which direct economic activity, sanction it or reward it. Employers try to anticipate changing consumer moods and hire or fire accordingly.
Contrary to a largely widespread idea, government intervention in the process of recruiting and dismissal is not a source of greater security for workers, in particular those who seek work. It can admittedly ensure the security of certain employees but only at the expense of the right of others to work. The “precariousness” which trade unions speak to us about is easier to live with than long years of unemployment without hope of finding a job. It requires certain efforts, it does not offer any guarantee but it is precisely for this reason that it makes it possible to find employment.
By preventing an employer from firing, one obliges it to take on an additional risk which consists of keeping on a person not or no longer suited to a job. Thus one forces it to ensure itself against the risk of seeing a new employee transform himself into an employee impossible to dismiss and yet inefficient at the task assigned to him. That leads to a rise in the potential and perceived costs related to all new recruiting decisions. The latter will resultantly be less important as well as employment in general.
In addition, in the absence of the freedom to dismiss, the employer will be much less inclined to give inexperienced young people a chance, the risk with these latter being even higher than with proven employees. On the other hand, if it can separate them more easily, it will also be more tempted to give young people the opportunity of proving their competence and thus of increasing the employment level throughout the economy.
Far from being synonymous with precariousness, the recognition of the right to lay off and the mobility which accompanies it supports security, that of obtaining employment rather than remaining permanently unemployed. Thus, the provision authorising dismissal during a period of two years of certain employees contained in the First Engagement Contract (Contrat Première Embauche) (as well as in the New Engagement Contract (Contrat Nouvelle Embauche)) is likely to support recruiting and ensure a greater security to employees as a whole. It should be wished that the benefits of a total freedom to hire and fire will soon be recognised.
CÉCILE PHILIPPE IS DIRECTOR OF THE MOLINARI ECONOMIC INSTITUTE