July 14th 2001

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Articles from this issue:

COVER: Singapore's economic lessons for Australia

Canberra Observed: Electoral map shows uphill battle for Coalition

Falling fertility debate reignited

Dissenters highlight dangers in UN report

Cloning: how far will states ban go?

Keep the single selling desk for wheat

The Media

Straws in the Wind

Letter: Export figures disputed

Minister resists competition push

Mass destruction in the future

Manufacturing and the sinew of war

Is corporate cost cutting becoming lethal?

French applaud 35-hour week

Books: Colonial Consorts, by Marguerite Hancock

Books: The China Threat - How the People's Republic Targets America, Bill Gertz

Letter: Barley story wrong

Letter: Trade, US-style

Letter: Riddle solved

Books promotion page

French applaud 35-hour week

by News Weekly

News Weekly, July 14, 2001
France's experiment with a state-imposed, shorter working week is beginning to alter the country's rigid social patterns.

According to Britain's Independent newspaper:

"Weekends now start on Thursdays or end on Tuesdays; many younger, working mothers choose to stay at home on Wednesdays, when French children are traditionally off school.

"The law, pushed through by the former employment minister Martine Aubry, already applies to six million employees in France, just over half the workforce. Next year, small companies with up to 20 workers will be given shorter working hours for the first time. A number of categories - including senior business executives, doctors, lawyers, journalists and soldiers - are exempted."

An official report published recently by Le Plan, the French Government's strategic planning body, said the mandatory 35-hour week, and its voluntary predecessor, had created 285,000 jobs in the past five years. It should have created 500,000 jobs by the time the law is extended to all businesses in 2002.

This is less than the 700,000 new jobs forecast by Lionel Jospin's centre-left coalition government when it came to power, promising a statutory 35-hour week, four years ago. The proposal was ridiculed by business leaders and many French, UK, and US economists.

They said that reducing 39 hours to 35, without a reduction in wages would reduce the competitiveness of French industry, discourage foreign investment, and see taxes and social charges rise as government sought to compensate employers. They said it would destroy more jobs than it created.

According to the Independent report, the contrary has happened:

"French unemployment has fallen from 12.6 per cent in June 1997 to 8.5 per cent this month, the lowest figure for 18 years. Almost one percentage point of this reduction should be attributed directly to jobs created by the reduction of the working week [according to the Le Plan report].

"Perhaps more important still, it says that the shorter working week has helped to dispel the atmosphere of 'all-encompassing pessimism' which gripped France in the mid-1990s. It has increased consumer confidence and consumer spending - boosting rather than crippling the French economy.

"Foreign investment in France is booming. Social charges on employers have not been increased so far but a potentially damaging row is still in progress on how to pay the $A4.2 (at least) unbudgeted, extra annual cost of subsidising companies who have switched to the shorter week."

Even the British Industrial Society, a think-tank with views close to that of Tony Blair, says that "The French seem to be throwing away the textbook of labour market policies. If the French experiment works then the UK Government may be forced to look at France rather than the US for new ideas about reforming the jobs market."

In exchange for reduced working hours, French workers have been required to renegotiate their labour contracts.

Workers have generally been willing to accept a more flexible allocation of their work time, along with some wage restraint. By annualising their hours of work, some may work 42 hours during the busy season, but only 32 hours in quiet times.

Annualisation also means that the amount of overtime a company must pay is reduced, while reducing layoffs in the off-season.

This had led to a rise in productivity.

But for the Government, there have been costs. To encourage industry behind the scheme, the Government is susidising the social payments - retirement, health care, workers' compensation and unemployment insurance - of newly hired low-wage employees.

Any employee earning up to 1.8 times the minimum wage receives compensation from the Government for some or all of his social contribution.

The cost to the government of subsidising employers who created new jobs was to be borne by lower unemployment payments, the existing social security budget and extra taxes on alcohol and tobacco.

The Jospin Government now faces a shortfall of at least A$4.2 billion a year, which it proposes to take from a large, but possibly temporary, surplus in the social security (health and pensions) budget.

The net cost to the French treasury of subsidising employers shifting to a 35-hour week is estimated in yesterday's report by Le Plan at A$12,800 per new job. Rationalist economists might argue that the money might have been better used on reducing business taxes or on infrastructure.

Overall, about one-third of the scheme's costs are to be paid for out of gains in productivity, a third by payroll cuts over the coming years, and the rest from government assistance.

However, at a social level, the 35-hour week is already a roaring success.

Two-thirds of people on a shorter week say that it has improved their lives. Working women, especially, say that a four-day week, or shorter working day, has made their lives tolerable for the first time.

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