IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
By Nicolas Lecaussin
In France the national economy and the fate of thousands of employees are regularly linked to the grand “social conference”. Successive presidents have paid tribute to the ritual of “social dialogue”. Nicolas Sarkozy did so several times during his presidency with well-known results: the unions firmly opposed the timid attempts at reform and finally called for a vote for the socialist candidate in May 2012. François Hollande enthusiastically followed suit by imposing a two-day “grand social conference” in July 2012.
Naturally, the outcome was nil, save the commitment to be more “social” and, a major innovation, the decision to engrave the concept of “social dialogue” into the Constitution. In fact, the more high-level social conferences are convened, the less reform there is. This is what happened recently, as the agreement between unions and employers is nothing but a kind of “social” free-for-all that has nothing in common with the large-scale employment reforms undertaken in countries like Germany under G. Schröder. This is why we believe there are at least five good reasons to get rid of the French-style “social dialogue”.
1. It isn’t a “social dialogue”. Officially, politicians meet with employer representatives and labour unions to listen to their demands. In fact, this is a done deal: the unions resist any reform, even symbolic, as soon as it concerns their privileges. Some sectors, such as Social Security or vocational training are off limits, as they provide substantial financing for the unions.
2. French unions are not representative. They represent but 4 per cent of the private sector workforce and exist (minimally) only within government-owned firms and public education. Their leaders are former civil servants or employees of the public sector. They have no experience of the private sector, and thus no legitimacy in claiming to represent the employees. Coming from the public sector, they have no interest in accepting the slightest reform that would reduce the reach of the government and the administration.
3. French unions are closed to the outside, or even mafia-like. A parliamentary report of December 2011 that denounced financial improprieties within unions was banned from publication, and the government rejected a bill relating to the matter. Several reports by the Court of Auditors, many inquiries, articles and books have exposed the covert financing of labour unions through pension funds, training centres, company funds and union activities. For among the four major unions (CGT, FO, CFDT, CFTC) membership dues represent only some 3-4 per cent of the budget! Overall, out of 5 billion euros in funding, at least 4 billion come from “public sources”. Numerous unions and employee funds have been sanctioned by the courts, and one union (CFDT SeaFrance) was even abolished (a unique event in France!). There is thus no reason to have a “dialogue” with “hoodlums”.
4. Important reforms are not implemented with union participation. Incidentally, France is the only country to succumb to the ritual of “social dialogue”. The Swedish pension reform in the 1990s was done by experts, without the unions: the subject was deemed to serious to be submitted to union discussion. How could you possibly negotiate union privileges and financing by involving the unions? The French pension reform is significant in this respect. Only the general system has been slightly amended, but pensions for civil servants and public employees remains untouched. The civil servant/union representatives have even taken over the board of the CNAV (the pension fund that manages the private sector pensions) although they are not even concerned. Similarly, how could one reform the unemployment insurance or the vocational training schemes without removing those who are taking most advantage of the system?
5. Finally, there is no longer time for dialogue, reform and action are urgently needed. The public debt and deficits will no longer await the famous dialogue, nor will pensions and health insurance. Spain and Italy have recently cut public sector salaries and reformed the labour market by granting the freedom to hire and fire. The unions opposed it, but they had to face facts.
It is time to abolish the legislation that established the myth of “social partners” and to submit labour unions to common law contracts and associations. Getting rid of the “social dialogue” means reducing unemployment.