May 14th 2009
From the Economist Intelligence Unit ViewsWire
President Nicolas Sarkozy unveils ay pla"to tacklen youth unemploymen in Francet

Responding to a sharp rise in unemployment in recent months, particularly among young adults, the French president, Nicolas Sarkozy, has unveiled an “emergency plan” to help 700,000 young people find employment during the period up to mid-2010. The partly state-subsidised measures should provide a boost to work and training opportunities in the near term, but the underlying weaknesses of the labour market, not least the high rate of structural unemployment among young French adults, will remain.

The number of people out of work is rising rapidly in France. Registered unemployment rose by 63,000 people in March, to 2,448,000. The number of unemployed was 22.1% higher than in March 2008. Male unemployment rose by 31.5% over the year, to 1,281,000, while female unemployment increased by 13.3% to 1,168,000. Younger workers are bearing the brunt of the deterioration in the labour market. At the end of March there were 451,600 persons aged under 25 registered out of work, an increase of 35.8% year on year. According to Martin Hirsch, the government's high commissioner for the young, the number is likely to exceed 650,000 by the end of 2009.

In view of the sharp rise in unemployment in recent months, recent fears expressed by trade unionists and others over the risk of unrest on the country's streets could yet prove not to be wholly ill-founded. Such concerns explain the French president's recourse (yet again) to a hands-on approach to economic policy. Mr Sarkozy recently presented what he termed an "emergency plan" to help 700,000 young people to find employment during the period up to mid-2010. The plan provides for the creation on a large scale of new jobs under various types of employment contract, all of them partially subsidised by the state. The eventual cost of these measures is uncertain, but is expected to exceed €1bn.
You're hired?

One aim of the plan is a target to create 320,000 apprenticeships, compared with 285,000 in 2008. To this end, any company that recruits a young apprentice before June 30th 2010 will be exempt from paying social security charges for that person for a period of one year. Furthermore, small enterprises (with fewer than 50 employees) will receive an additional, direct subsidy of €1,800. A national advertising campaign will be launched to promote the apprenticeship scheme.

A second aim is to promote combined work and training opportunities. For example, the government hopes to finance 170,000 new contrats de professionnalisation (known as contrats pro) by mid-2010, up from 145,000 in 2008. Under this type of contract, work experience is alternated with formal training. As an incentive for companies to offer these contracts, the plan proposes a direct one-off subsidy, worth €1,000 for each person aged less than 26 who signs up. If the person has not achieved an educational qualification equivalent to the baccalauréat school certificate (academic or vocational), the subsidy is doubled to €2,000. These subsidies appear to supplement the one-off payment of €1,000 that, according to draft legislation currently before parliament, is to be provided directly to employees who sign a contrat pro with a small company.
Temp time

The president's employment plan also contains numerous measures to improve the prospects of young workers with temporary work contracts. For example, those on a two-month placement will benefit from a minimum wage of €400 per month, placing them on the same footing as placements for three months or longer. To encourage the transformation of placements into permanent employment contracts (contrats à durée indéterminée, or CDIs), enterprises making this change before the end of September will receive a payment from the state of €3,000 per head. It is hoped that this incentive will lead to the creation of 50,000 CDIs.

In addition, during the second half of 2009 the government will finance an additional 50,000 contrats initiative emploi (CIE)—another type of subsidised contract that was introduced in 2005 as a means of helping those experiencing chronic difficulty in finding work in the private sector.

Finally, the emergency plan aims to encourage recruitment by local government through financing 50,000 extra contrats d'accompagnement dans l'emploi (CAE). These contracts provide a state subsidy for the beneficiary's remuneration and training, and like the CIE are targeted at those experiencing chronic difficulty in finding work. One new element to these CAEs is that they will be geared to the acquisition of transferable skills that can be put to good use in the private sector (for instance, computing skills, childcare, property management). The national employment agency will be entrusted with the task of proposing future private-sector jobs to CAE beneficiaries.
Same old story?

High structural youth unemployment in France has been a problem for the past quarter of a century—the difficulties experienced by young French adults in progressing beyond a series of short-term placements or temporary work to obtain permanent jobs have been well charted. This problem is now being aggravated by the most severe economic downturn since the end of the second world war.

Although during his presidential election campaign Mr Sarkozy called for the state to reduce the number of subsidised employment contracts, there is little doubt that elements of the emergency package are warranted given the scale of the labour market crisis affecting many young adults in search of work. The problem facing the government over the medium term is how to tackle the politically difficult decision of reversing yet another expansion in state-subsidised employment, particularly if economic activity remains subdued over a protracted period.