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2019 OECD Economic Surveys: France 2019

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France's economic growth has slowed down after a gradual recovery. Limited productivity and employment gains have reduced the growth of GDP per inhabitant; public spending remains very high. Reducing public expenditures is needed to put debt on a firmly declining path. This and streamlining the tax system would also help reducing taxes, which would boost economic activity eventually. Continuing to foster a more flexible labour market would lead to higher productivity growth and living standards. The unemployment rate is particularily high for low-skills, and young and older workers: higher skills and better education outcomes would support a more inclusive labour market and intergenerational mobility. The quality of the public capital stock is high in France: improving its maintainance would strengthen this asset. New investment should help drive the economy towards greener growth – in particular investments in energy and transport – and more digitalisation. This should be achieved by applying rigourous cost-benefit analyses even more widely.

SPECIAL FEATURES: LABOUR MARKET PERFORMANCE; PUBLIC INVESTMENT

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Improving labour market performance

Implementing the OECD Jobs Strategy

This chapter presents a detailed analysis of the French labour market from the perspective of the OECD Jobs Strategy.. Several analytical contributions were prepared for this chapter: i) the quantification of the impact of recent reforms in the taxation of labour and social benefits, designed to improve the economic situation of low-wage workers; ii) an intermediate update of the OECD’s Employment Protection Legislation (EPL) indicators; iii) an analysis of the impact of the cap on compensation for unfair dismissal; iv) an analysis of the reforms in collective bargaining practices and social dialogue, such as the reduction in the number of professional branches. Since 2015, job creation has lowered unemployment and underemployment, but the French labour market still faces many challenges. Employment rates are increasing but remain low, the population is unevenly skilled, and job turnover on less-than-one month contracts has increased for part of the workforce. The economy has not created enough high-quality jobs for the economic and social integration of large numbers of young people and those with few qualifications. Ambitious reforms have been introduced to reduce the uncertainty over dismissal costs while improving training opportunities for those with low qualifications, and increasing resources for careers guidance and advice, in a way consistent with the OECD Jobs Strategy. The government has also restructured social dialogue at the firm and branch levels, reduced uncertainty over dismissal procedures and engaged a reform of unemployment benefits. In order to fully leverage these reforms, priority will have to be given to making continuous training more effective and limiting the perpetuation of inequalities and school drop-out rates. Simplifying the organisation of career and guidance services and facilitating professional mobility would also help to align the supply of labour with demand and generate sustained productivity gains. Firm-level social dialogue should be promoted, as well as business involvement in initial and lifelong training. Furthermore, the ongoing reform of the unemployment benefit system as well as merging the different support mechanisms for low-income households would improve the efficiency and transparency of the welfare system while offering stronger incentives for a return to stable employment.

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