French President Emmanuel Macron is pushing ahead with the country’s largest labour market reforms in the 2019 budget.
“I will not change course”, Macron told the French newspaper Journal du Dimanche in September. “We’re in a moment when many political leaders before me have yielded”, he said. “But it’s more necessary than ever to move ahead with reforms”.
The 2019 budget plans to cut up to 26 billion euros of taxes for workers and employers – cutting labour charges on employers by about 20 billion euros and household taxes by around 6 billion euros. The budget will also reduce employee health care contributions and unemployment insurance payments. A tax on overtime pay and a housing tax are set to be eliminated by next September. A separate plan will set aside 8 billion euros in aid and job-training programs for disadvantaged youths to deal with rising poverty.
French Finance Minister Bruno Le Maire supports these reforms, saying the labour overhaul must go on, despite the fact that the changes in the pension and unemployment insurance system slated for next year will likely be contentious. “We already have the first benefits of the reforms, but these are for the time-limited benefits, and I think we still have to wait some more – 12 or 24 months – before getting the full benefits of the reforms”, he said.
Le Maire is referring to the plethora of economic reforms that Macron launched in 2017, upon assuming the presidency, which include changes to the labour code that have trimmed unemployment from 10.1 per cent when Macron took office, to just over than 9 per cent today, as well as the remake of a more meritocratic higher education system, and a reduction in taxes for entrepreneurs.
Macron’s biggest achievement to date may be his economic policies and personal marketing that have encouraged major tech companies like Facebook and Fujitsu (a Japanese multinational tech company that plans to expand artificial intelligence research in France) to increase investments in the new start-up and tech nation.
In January, the chief executives of the world’s biggest tech companies announced they would be investing 3.5 billion euros and creating at least 2,200 new jobs in France over the next five years. For example, DeepMind, a London-based machine learning company owned by Google’s parent company, Alphabet, recently announced it will expand its operations to Paris, as Britain prepares to leave the EU next March.
With Brexit on the horizon and a number of European countries turning toward more isolationist and anti-EU politics, France has become a particularly important player in increasing the strength of the union. Macron’s support of open borders and his business-friendly policies have prompted much praise from European leaders.
However, it is precisely these business-focused reforms that are stirring protests from some French workers. Macron’s domestic approval ratings have slumped in recent months, as workers claim they do not see the benefits of Macron’s reforms, even as the unemployment rate has decreased – though not by as much as expected, given that Macron has promised to lower unemployment to 7 percent by the end of his term in 2022.
The government is hoping that the planned 6 billion euros worth of tax breaks for the working class in next year’s budget will help stem some of the protests.
At the same time, the president is not giving up on his pro-business tendencies, which he and European lawmakers believe will greatly help the French economy in the long-term. In a new policy that the government hopes will come into force early next year, France will reduce regulatory barriers – including slashing corporate social security taxes and easing requirements for companies to have union representatives – for small and medium sized companies (SMEs), in an effort to grow these companies and allow them to begin exporting their products, which would boost France’s overall growth rate.
The European Commission President, Jean-Claude Juncker, along with other EU political leaders, have supported Macron’s reform agenda, saying it will help promote Europe, showing the attractiveness of membership in the union.
“This is a positive signal for Europe”, Juncker said about Macron’s election in May 2017, calling it “a signal of hope” amidst Brexit and increasingly populist politics that threaten to divide the bloc.