Unemployment Rate in Germany & France: Is Anglo-Saxon Policy the Answer?

[DM]

Germany
http://news.bbc.co.uk/1/hi/business/4723795.stm

France
http://news.bbc.co.uk/1/hi/business/4727103.stm

How can we see a roboust employment rate after debacles from the EU? Is an anglo-saxon policy the adequate policy to implement in Europe?

 

[russ_watters]

The problem is systemic and unlikely to change any time soon: too much socialism.

 

[DM]

Well, the interesting aspect of combating unemployment in France is that Dominique de Villipin (new prime minister) has the belief of creating a new - two year job contract for companies with fewer than 20 employees. With France covered, addressing problems in Germany is never easy but learning that a new election is just around the corner, who knows if unemployment is associated with the incompetence of Prime Ministers and not EU policies?

 

[Pengwuino]

two year job contract for companies with fewer than 20 employees.

What are the stipulations for releasing someone from the contract? Or what are the stipulations for being able to enter the contract?

I mean it can't just be a guaranteed 2 year contract or else you could be hired and just be an incompetant fool for 2 years and receive a paycheck.

 

[DM]

I mean it can't just be a guaranteed 2 year contract or else you could be hired and just be an incompetant fool for 2 years and receive a paycheck.

I'm not entirely sure if that's what Dominique de Villipin has in mind. I believe this new 2 year contract policy has being created in order to avoid employees from being sacked for the benefit of the company - cutting employees - and as a result creating another unemployment situation.

 

[DM]

The 2 year contract policy will at least thwart unemployment rates from increasing at a fast rate. If you like it will prolong employment.

 

[Pengwuino]

I'm not entirely sure if that's what Dominique de Villipin has in mind. I believe this new 2 year contract policy has being created in order to avoid employees from being sacked for the benefit of the company - cutting employees - and as a result creating another unemployment situation.

That can't be the reasoning. A company with <20 people would be destroyed if that were the reasoning. Small businesses main expense is employees by far and if your forced to keep them, the business would be running a huge risk and would fail in many situations.

Your not going to prolong any employment. The FEW situations where money can be saved through other means then employees in a small business is going to be far outweighed by when businesses fail because the employees are indeed the biggest expense and they are forced to shut down because they stay in the red indefinitely.

For example, in the US, either 25% or 75% (forget which) of all small businesses fail within the year. This idea would be a disaster for the US economy and I don't really see why it would be any different in Europe. You would lose all flexibility, you would be even more vulnerable to market trends then you would normally be.

 

[DM]

For example, in the US, either 25% or 75% (forget which) of all small businesses fail within the year. This idea would be a disaster for the US economy and I don't really see why it would be any different in Europe.

Yes, it's a very good point. The stipulations of this 2 year contract are unknown to me, only the policy.

 

[Pengwuino]

Yah it makes no sense. Maybe its OVER 20 people... but then again that still makes no sense because many jobs have enormous turnover rates (large chain stores, restaurants, etc). I'll try to find out what's the deal with that.

Is this it?

Sounds like the opposite of what your saying.

 

[loseyourname]

Villepin’s “new employment contract” applies to firms of less than 10 employees and extends the probation period for new-hires, presently two to three months, to two years. During this period, bosses will be able to fire workers without any justification and without the worker having any legal redress for unfair or wrongful dismissal.

Yeah, that doesn't sound like a two-year guaranteed contract to new hires, which would be idiotic anyway. Is this actually true, though? Could a law seriously be passed that allowed an employer to fire any employee for up to two years for whatever reason they wanted? Is the situation really that bad in France that they have to give employers that kind of incentive to hire people?

 

[Pengwuino]

Well how is it different otherwise? Can't you fire people for no reason no matter how long they ahve worked for you in any country? (except gov workers of course). I mean its your own business, why can't you decide how to run it.

All I can think of is that maybe France is like the US where you cannot get unemployment if you were fired as opposed to laid off but I am still not sure how that would make sense here either.

 

[loseyourname]

Well how is it different otherwise? Can't you fire people for no reason no matter how long they ahve worked for you in any country? (except gov workers of course). I mean its your own business, why can't you decide how to run it.

I'm sure you've held a job. Read the labor laws they post in the employee break room. You're only allowed to fire people, after the probationary period, for poor job performance.

 

[The Smoking Man]

I'm sure you've held a job. Read the labor laws they post in the employee break room. You're only allowed to fire people, after the probationary period, for poor job performance.

And Usually only after two warnings... Unless you do something criminal.

 

[Pengwuino]

I'm sure you've held a job. Read the labor laws they post in the employee break room. You're only allowed to fire people, after the probationary period, for poor job performance.

Wrong again buddy. No job :P lol.

Ok that no longer makes sense... and i guess there's no 'strike' code on this forum either.

 

[The Smoking Man]

Wrong again buddy. No job :P lol.

So you can't fire people for cost cutting or relocation or things like that? Thank god my business was pulled back down to Earth before it could take off and crash.

You DO know the difference between lay-off and Fire, don't you?

 

[Pengwuino]

You DO know the difference between lay-off and Fire, don't you?

oops, sorry. Forgot about that.

 

[DM]

Sounds like the opposite of what your saying.

This new 2 year contract policy came to my attention in The Economist.

Link

The article displayed online is not fully available to readers. I do however have the article in magazine. "He is creating a new two-year job contract for companies with fewer than 20 employees, with much-needed easy dismissal rules, which will come into effect as soon as September."

 

[arildno]

Although it might be true that unemployment rates are falling, this articles shows that some job markets are dwindling as well:
http://www.theonion.com/news/index.php?issue=4134&n=1

 

[vanesch]

What are the stipulations for releasing someone from the contract? Or what are the stipulations for being able to enter the contract?

I mean it can't just be a guaranteed 2 year contract or else you could be hired and just be an incompetant fool for 2 years and receive a paycheck.

It is the opposite. Up to now, in France, there existed 2 kinds of contracts: CDD (finite-duration contracts) and CDI (indeterminate duration contracts).

CDD contracts were just that: both parties (employer and employee) were linked by the contract for the entire duration of the contract, no matter what happened (ok, some exceptions, like putting fire to the workplace or so exist I guess). You were guaranteed your paycheck during the CDD, no matter how you performed. It was limited to 2 years. And you left at the end.

CDI was what everybody was looking for: a contract of indeterminate duration. It could not be given up from the employer's side except in the frame of a layoff plan or in the case of serious fault on the side of the employee. In the case of the a layoff plan (negociated with unions and so on) often you could get away with one or two years or even 5 years equivalent of your salary. At the beginning of a CDI, however, there was a 6 month trial period, where both parties could stop the contract immediately without any formality. (after that, the employer was linked for ever, and the employee had to give a term of resignation, which started with 3 months and increased as a function of the time spend on the contract: he was forced to stay at least this period after informing his employer of the decision to leave).

The problem addressed by the new contract proposed by de Villepin is the following:
During 2 years, both parties (employer and employee) can stop the contract as in the 6 month period of the CDI. However, the contract only exists for employers with less than 20 employees. After those 2 years, it becomes a full CDI.
The reasoning was that small companies often refrain from hiring people because they don't know yet if they will economically manage to keep the person (and rupture of a CDI is a very expensive affair for the employer). So the idea was to give them more flexibility to hire someone, and if they see that they can't manage, they can just lay him off. Always better than not hire anyone, and also better than a CDD, where the employee would leave after 2 years.

EDIT: in a way, the new contract is exactly as the CDI, except that the 6 month trial period is changed into 2 years. The reason is different: 6 months are judged sufficient to find out if an employee fits for the job. However, 2 years are deemed necessary to see if the employer can economically keep the employee.

This whole story must be incomprehensible to Americans where employment is much more flexible, I guess :-)

 

[DM]

Thanks for the fine explanation Vanesch.