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Reforms in Europe needed, most say

Labor strife in France prompts questions about how to change generous workplace systems.

By ASSOCIATED PRESS
Published April 3, 2006

PARIS - In much of Europe, the idea that a company can dismiss workers just because profits are sagging is unacceptable, an affront to modern values.

Yet economists say that even if the American model - under which layoffs are common - would never fly in Europe, reforms to Europe's labor laws are crucial to the continent's economic health. The battle in France over a new labor law is just the loudest and latest sign that the European system is ailing.

The question of how to cure it is prompting soul-searching and underscoring divisions across the continent. At stake is Europe's vision of itself: Is it the world's epicenter of enlightened ideas, or an economic heavyweight? Can it be both?

"Nobody has a magic recipe," said Marco Manacorda of the London School of Economics. "We need to ask hard questions."

The European Union has had little luck stepping into the fray. One of the most divisive EU debates of late was over a law that would have allowed companies to operate under the labor regulations of their home country while doing business in another EU country. It was struck down recently.

In the United States and Britain, young people frequently jump from job to job. To dismiss an employee, companies can often just say, "You're fired."

The proposed law in France causing such an uproar - allowing employers to fire workers younger than 26 for no reason during their first two years on the job - is of course standard practice in Florida. Regardless of age; regardless of number of years on the job.

In Florida, any job security comes not by law but by way of union contract, individual employment contract (think CEOs) and personal connections.

But in France, workers who land a coveted permanent contract can plan to stay at their jobs until retirement. To fire most employees, companies not only have to give at least three months' notice, pay fines to the state and up to three years of severance - they have to convince a judge that the dismissal is justified, something they don't always manage to do.

The French government says these rules are crippling and at fault for persistent unemployment, and devised the law that affects workers younger than 26.

Unions and students were stunned, and are staging mass protests and strikes in a bid to bury the law. To them, job security is one of democracy's achievements, and infringing on it is a step backward.

France shouldn't aspire to an economic boom like in China, "where there is not much unemployment but the working conditions are not acceptable," said the head of the country's main student organization, Bruno Juillard.

Meanwhile, many French workers and employers are seeking profits elsewhere. Registering offshore has become a popular way for French companies to avoid labor restrictions and high taxes.

Francois Flandin is the only one of his circle of business school friends in France. The others have moved to London, Singapore or New York, where they say it's easier to land a job.

"The problem is that soon in France we won't work at all," the 32-year-old investment banker said, referring to generous vacation benefits and the 35-hour workweek.

Some French economists have suggested abolishing the 35-hour rule, citing studies that show it has done little to create jobs as it was meant to.

Part of Europe's challenge is getting its growing numbers of immigrants into the work force. The French jobs law is aimed partly at immigrant youth, who face unemployment rates as high as 50 percent.

Manacorda says the key is to reform pension benefits, instead of introducing measures that punish young people.

Without a permanent job in France, it's nearly impossible to rent an apartment, buy a house or obtain a bank loan. Many French youth live with their parents throughout their 20s, drifting among unpaid internships, temporary jobs and the unemployment line.

Although France's labor protests have been the most vigorous, other Europeans are antsy about the erosion of job security.

In Britain, public sector workers shut down schools, council offices and other services Tuesday in a one-day strike over a pension dispute. And public workers in southwestern Germany have been striking for eight weeks over an attempt to extend working hours.

Job protections have been a major campaign issue ahead of Italian elections next month. More than half of Italian college students consider a job-for-life fundamental or very important, according to a study last week.

Hughes Challan Belval, financial director of a French computer firm, predicted that France will streamline its labor laws over the next two or three years out of necessity - despite the vocal opposition. Today's crisis, he said, "is a veritable psychological problem."

Times staff writer Helen Huntley contributed to this report.

[Last modified April 1, 2006, 23:14:02]