Reform of Unemployment Benefits
6th February 2023
The rules on unemployment benefit have been toughened, although it remains one of the most protective schemes in Europe.
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The right to unemployment benefit (allocation chômage) in France requires you to have worked at least 6 months in the previous 24 months.
The duration of the benefit covers the period of your previous employment, up to a maximum of 24 months for those under 52 years of age, rising incrementally to 36 months for those aged 55+.
In 2019, as part of his presidential campaign, President Macron vowed to reform the scheme, saying that it runs at a huge deficit (outstanding current debt of around €60 billion), and it does not do enough to promote the return to work.
The level of unemployment in France is currently around 7.0%, substantially higher than many other European countries, despite there being 400,000 current job vacancies.
Some limited reforms were agreed in 2019 and 2021, including capping benefits for higher-earners and granting business owners the right, under certain conditions, to claim unemployment benefit.
After further extensive and difficult negotiations between the employers and unions who jointly run the scheme (which is funded by the government), the final elements of the reform package have been agreed.
Under the new scheme the duration of cover will be calibrated with the unemployment rate in the country; when the economic situation is good the entitlement will be tightened, which will be relaxed when the economy deteriorates.
Accordingly:
- Under 9% national rate of unemployment over three quarters of a year, or an increase less than 0.8% over the same period, the duration of cover is reduced by 25%.
- Conversely, when the rate goes over 9% or increases by 0.8% in one quarter, full benefits as currently provided are reinstated.
This means that someone who might be otherwise entitled to 24 months cover, would now only be covered for 18 months; a person with a right to 10 months benefit would find it reduced to 7.5 months, and so on.
The idea of modulating benefits according to the unemployment rate was inspired by similar systems in the USA and Canada.
Critics argue that the new scheme is too favourable to maintaining full benefits, although others point out that around half of those who are currently unemployed have no entitlement, relying on minimum supplementary benefits.
The new rules came into effect 1st February 2023, but any reductions will not start until autumn at the earliest.
Nevertheless, the new agreement only runs to the end of 2023, when employers and unions will need to sit down again to either extend it or further revise it.
Under the new scheme, the entitlement to the benefit will not change, and the calculation of the amount payable remains the same.
The graphic below shows the amount spent on unemployment and related benefits as a percentage of GPP across several countries of Europe.
The position of France in the league table is a result of both the duration of cover and the amount of the benefit, both of which are generally higher than elsewhere.
Although a complicated equation applies, in France benefits are payable at the rate of 57% of the average previous salary, but it can rise to 75%. Some other countries have higher rates, but a lower maximum ceiling, which in France goes up to nearly €8,000 a month.
It is a system that is therefore very generous to those are already well-heeled.
The sanctions against those who refuse to take commensurate offers of employment are also lighter than other countries. There is no suspension of benefits for the first refusal, only one month for the second and two months for the third, although tougher rules do apply for those on short-term contracts who are offered commensurate permanent contracts which they refuse.
The UK stands out as having a paltry level of unemployment benefit of up to €80 per week, as well as some of the toughest sanctions. Supplementary benefits are also potentially payable, but that is also the case in France and elsewhere.
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