The civil service, welfare and pensions will all be shaken up
Six months ago Emmanuel Macron was facing the most serious political crisis of his presidency. Gilets jaunes (yellow-jacket protesters) marched on the Elysée Palace, vowing to invade the presidential office. Tear gas hung over the wreckage of torched vehicles and smashed windows. Mr Macron’s time as a credible reformist leader, it seemed, was up.
Today the French president has a fresh spring in his step. His poll ratings, though low, are back where they were before the protests began. Mr Macron may have come in second to Marine Le Pen in the recent European elections, but only by a fraction. And the vote confirmed the collapse of the traditional French right and left that the young leader helped to engineer. Now, after months of crisis management, Mr Macron is launching “Act II” of his presidency. This second round of reforms, unveiled by Edouard Philippe, the prime minister, on June 12th, is designed to match in scale and ambition the shake-ups to the labour market, railways, education and fiscal policy that marked the first 18 months of his presidency. Besides a fresh emphasis on greenery, three structural reforms stand out: reorganisation of the public sector, reform of unemployment insurance and welfare benefits, and rationalisation of the French pension system.
On the first, a bill to “transform” the public sector is already going through parliament. The purpose, says Olivier Dussopt, the junior minister in charge, is “to modernise management in the public sector, and make it more responsive—both for the careers of public-sector workers and for users of public services.” France’s mighty civil service employs 5.5m people, most with jobs for life. These are secured by passing an entrance exam, after which “management” is a generous term for what happens to careers. Bosses have little say over recruitment, let alone promotions, which depend on approval by committees, on which unions occupy half the seats. Teachers, for instance, need the committees’ approval even if they want merely to change schools. The system cramps mobility and demoralises all concerned.
The new rules will enable managers to hire more easily from the private sector for short-term projects and longer contracts. The promotions committees will be relegated to judging contested cases. The idea is to give managers more freedom and responsibility, a change that Mr Dussopt calls “very profound”. For French civil-service culture, these amount to “very radical changes”, says Ross McInnes, the chairman of Safran, an aeronautical giant, who co-chaired an official public-sector efficiency review last year.
A second reform, of benefits, is two-pronged. The government will soon unveil new rules for unemployment insurance which will, among other things, involve tapering payments and lowering payouts for higher earners. France is unusually generous. An employee on average earnings gets 68% of previous income if he loses his job, compared with 59% in Germany and 34% in Britain, according to the oecd. The reform will be controversial; talks between unions and employers on this subject collapsed earlier this year. Even more so will be the government’s bill next year to merge housing and a tangle of other welfare payments into a single “universal benefit”. The underlying principle of all this, says a presidential adviser, is “to make work pay”.
Perhaps the boldest of all is pension reform, designed to merge 42 existing regimes into a single, fairer and more transparent system. The idea is to encourage job mobility and, implicitly, to delay retirement. The French currently spend more time in retirement than anybody else in the oecd, and the state pension system is in deficit. Mr Macron says he will not raise the legal retirement age, which would help meet that shortfall. But the merged system, when its rules are unveiled in the autumn, may end up encouraging later retirement anyway. The reform is as politically sensitive as it is ferociously complex. “It’s probably the most ambitious reform of Macron’s presidency,” says Jean Pisani-Ferry, an economist who co-ordinated Mr Macron’s campaign manifesto in 2017.
The president’s newfound confidence will not in itself be enough to make these reforms work. Some in government worry that they involve a big political effort for little budgetary gain, at least in the short run. The government has already pushed its budget deficit back above the 3% of gdpMaastricht limit this year, partly because of income-support measures designed to calm the gilets jaunes. Others fear that Mr Macron has let slip his campaign promise to trim the size of the civil service. Detractors of a different sort accuse Mr Macron of wanting to privatise it, and to dismantle the welfare system. After the gilets jaunes have monopolised the airwaves for so long, unions are keen to make their voice heard.
If anything, the gilets jaunes protests showed that public policy cannot be decreed from on high, and Mr Macron claims that he has heard and understood this message. Yet his reputation also rests on a willingness to enact unpopular reform, at a time when his earlier policies are now starting to show promising results, notably in terms of job creation. Act II of Mr Macron’s presidency will test whether those two objectives can be reconciled.