Macron to Overhaul Welfare Despite Economic Crisis and Elections

(Bloomberg) -- French President Emmanuel Macron is pushing through contested and delayed changes to unemployment insurance, even as the labor market reels from the shock of the Covid-19 pandemic and as he faces a re-election challenge a year from now.

The overhaul, which the government initially designed to reduce instability and encourage people to take longer-term contracts, could cut benefits for some job seekers and ultimately hit some firms with higher contributions. After repeated delays during government lockdowns, the reform will now come into force July 1, albeit with an easing of some of the measures, officials at the labor ministry and Prime Minister's office said Tuesday.

Macron's decision to go ahead with the changes in a watered-down format aims to strike a balance between completing the agenda he pledged when elected four years ago, while not scuppering his chances of winning the presidency again in 2022.

The reform of welfare is the third plank in a trio that includes earlier changes to labor laws and training. The European Union is watching progress closely as it requests countries show evidence of such so-called structural reforms in order to get financing from the bloc's Covid recovery fund.

“Unjust, Anachronistic”

But the changes to jobless benefits have met with fierce opposition from labor unions and risk hitting voters with only a few months to go to the presidential election in April 2022 and at a time when the economy will only just be turning the corner from the pandemic.

Marine Le Pen, the leader of the National Rally party who is polling neck-and-neck with Macron, described the overhaul as a “political stupidity” and an “infamy.”

Laurent Berger, the leader of moderate labor union CFDT, also slammed the reform, even if he acknowledged some concessions the government made compared to the initial 2019 plans. “Its philosophy and its impact are still there: it is unjust, anachronistic, incoherent and unbalanced,” Berger said in a message posted on Twitter.

Softening the Impact

To soften the impact, the government has introduced a clause that means some measures will only kick in once the labor market improves in terms of new hiring and the number of unemployed. Those measures include tougher conditions to qualify for income support and the gradual reduction of benefits for those with the highest claims. The labor ministry also said it has introduced a floor that guarantees a higher minimum level of payments than in the initial pre-Covid plans.

For companies, the penalties, which will depend on the type of contract they offer new hires, will now only kick in from September next year, and the sectors worst hit by the crisis and government lockdowns will be temporarily exempted.

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