French President François Hollande is battling to push through controversial labour market reforms. Clashes have erupted between protesters and police, as thousands have taken to the streets in anger at the new laws. Hollande, who faces re-election next year, is the least popular president in modern French history. He hopes that the reforms (including making it easier to hire and fire workers) will help drive down unemployment levels that have been stubbornly hovering above 10% in time for the election in May 2017.
Economists often prescribe “structural reforms” as a way to boost economic growth and drive down unemployment. For example, new laws might make the labour market more flexible by making it easier to hire employees on short-term contracts, or reduce job security so that struggling firms can lay off workers. For individual workers, these reforms can mean lower quality work (worse hours, less benefits, more uncertainty about long-term employment). On the other hand, proponents argue that it also means companies are more willing to hire, which creates more jobs.
Overly-rigid labour markets can be great for “insiders” (i.e. workers with good contracts and lots of rights and protection), but if the economy struggles as a result then it can be difficult to gain that insider status.
We had a comment sent in from Oliver, who argues that some reforms are urgently needed, and that trade unions working to block labour market reforms are not acting in the long-term interests of European workers.
To get a reaction, we spoke to Martin Kahanec, Associate Professor at the Central European University and co-founder and Scientific Director of the Central European Labour Studies Institute (CELSI). How would he respond to Oliver?
The thing is that any reform creates winners and losers. And the fear might be that some of the constituencies of trade unions – some groups of workers – might be among the losers. So, being risk-adverse, the unions might oppose reforms. But good reforms provide greater welfare to society at large.
What is needed are reforms that are properly evaluated, and policy-making based on evidence where the impacts are well-measured. Then it would be easier to communicate the costs and benefits to unions, and there is a better chance that any measures would be adopted and supported by the trade unions.
For another perspective, we also spoke to Florian Moritz, Head of European and International Economic Policy Division, Confederation of German Trade Unions (DGB). How would he respond to Oliver?
Well, ‘reform’ is a word with many different meanings. There is no question that reforms can be a good thing if they are the right reforms. But what are usually called ‘labour market reforms’ in Europe are certainly not in the best interest of workers. For example, the labour market reforms we’ve witnessed during the crisis, demanded by the European Commission or the Troika in different crisis countries, are very much against the interest of workers.
For example, we’ve seen several reforms in different countries where the systems of collective bargaining has been practically destroyed, and this leads to lower wages, lower benefits for workers, and lower quality of jobs. These are definitely not the right reforms, and even in the long-term they don’t do any good.
The official argument in favour of such reforms is, in fact, precisely that they should lower wages and then there will be more jobs because we have lower wages. But this is, of course, not true and is simply a false economic theory that is doing a lot of harm to Europe..
Should trade unions support labour market reforms? Or are ‘reforms’ an excuse to push down wages in Europe, and diminish job security? Let us know your thoughts and comments in the form below, and we’ll take them to policymakers and experts for their reactions!
IMAGE CREDITS: CC / Flickr – DncnH
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