France Offers to Pay Most of Young Hires’ Salaries

by Sylvie Corbet
Wednesday Aug 29, 2012
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PARIS (AP) - The French government is offering to pay most of the salaries of tens of thousands of young people hired next year, as part of President Francois Hollande’s promise to wage war on unemployment.

France’s unemployment rate is 10 percent, but 22.8 percent for those under 25 - an imbalance that many European countries are struggling with.

French employers are especially reluctant to hire young people because restrictive labor laws make it very hard for companies to lay off employees. In addition, many industries require a series of often unpaid internships before landing a full-time job or only offer very short-term contracts for those just starting out.

Under the plan, unveiled at a Cabinet meeting Wednesday, companies that hire a person between 16 and 25 for at least a year will only have to pay as little as 25 percent of the salary. The government hopes to create 100,000 of these "contracts for the future" next year and another 50,000 in 2014. It has promised to continue paying its share of the employee’s salary for three years.

"We are waging a battle for jobs," Hollande told Cabinet ministers, according to government spokeswoman Najat Vallaud-Belkacem. "It’s the No. 1 challenge of our mandate."

The government will give preference to young people hired from poor urban or rural areas that have been hit hardest by rising unemployment. Certain sectors will also be favored, such as medicine and digital or green technology.

The proposal needs to make its way through Parliament, but Hollande’s Socialist Party has a solid majority there and the issue was a major campaign promise. Hollande has staked his credibility on driving down unemployment and encouraging growth, all while meeting strict budget deficit targets. It’s unclear whether he can manage all three - especially since the economy’s fate is largely tied up with Europe’s wider debt crisis and the well-being of its neighbors.

An entrepreneur’s association immediately panned the idea.

"The jobs for the future are only a Band-Aid, if a necessary Band-Aid, in the face of a government that every day shows itself more incapable of overcoming the difficulties our country is confronted with," said Guillaume Cairou, president of the Club of Entrepreneurs and CEO of strategy consultancy DIDAXIS. "How can they not see that this cost is extremely high for the government, even while we should be reducing our deficit?"

The government estimates that the program will cost €2.3 billion ($2.9 billion) next year; it did not detail costs for the following years.

While France has so far dodged investor concerns that have driven borrowing costs high in Spain and Italy, many economists say its day is coming. While the sheer size of its economy - the eurozone’s second-largest - has insulated it, they insist that its declining competitiveness will eventually force it to make the kinds of tough reforms its neighbors are facing.

Cairou said the plan seemed like just another attempt to put off those tough decisions.

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