Competitive Advantage Could Force French Labor Changes

French President Francois Hollande has vowed to improve his country's competitiveness. But to better compete, France has to overhaul its labor market, and some hard-earned workers' rights and privileges could be lost.

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You might have heard about efforts in France to hit its super-rich with super-high taxes. An even bigger challenge is getting France's less-competitive labor practices under control. The French economy is still considered solid, but analysts say much-needed labor reforms have to happen soon. Still, changing work habits and a cherished way of life won't be easy, as Eleanor Beardsley reports in today's Business Bottom Line.

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ELEANOR BEARDSLEY, BYLINE: 2012 ended in France with massive protests by steel workers. They were demonstrating to save jobs and two blast furnaces, set to be shut down in the east of the country. The Indian billionaire owner of the plant was demonized, and there were calls to nationalize the facility to save the jobs.

That's something that hasn't been done since the last socialist president, Francois Mitterrand, was in power 30 years ago. Despite being elected on promises to create jobs with public spending, the current socialist president, Francois Hollande, has morphed into a fiscal disciplinarian. The grave state of the French economy gave him no choice.

PRESIDENT FRANCOIS HOLLANDE: (French spoken)

BEARDSLEY: Speaking at the New Year, Hollande said his top priorities in 2013 were reducing the deficit and increasing French competitiveness. He is also bringing employers and unions together, in talks to reform the French labor market.

HERVE BOUYHOL: The labor market reform that is being discussed is really crucial. And it is the - unique opportunity to change the functioning of the labor market deeply.

BEARDSLEY: That's economist Herve Bouyhol, with the Organization for Economic Cooperation and Development.

BOUYHOL: But when you do reforms - and especially, deep reforms - there are always losers.

BEARDSLEY: Even more than increasing taxes, changing French labor laws will shake people up. That's because it goes to the heart of hard-won workers' rights, and a cherished way of life here. But only the far left denies that some of the country's labor laws may be decreasing its ability to compete. France has lost 750,000 industrial jobs in the last decade. And its percentage of European exports has shrunk, from 13 to 9 percent.

France is envious of Germany's thriving, midsize companies. France has giant corporations, and thousands of smaller companies with 49 employees each. That's because at 50 employees, a stringent labor code kicks in that makes it nearly impossible to get rid of a worker. Laurence Parisot is head of the French organization of small and medium-size businesses, the MEDEF.

LAURENCE PARISOT: (Through translator) Today in France, employers have an absolute fear of hiring, and that's what we must change. Instead, we have some politicians spouting off about nationalization. This is certainly not the kind of talk that will lure investors, and help modernize our economy.

BEARDSLEY: Former conservative President Nicolas Sarkozy became a lightning rod for unions and the left, as he tried to ram through reforms. Analysts say leftist Hollande may just have a chance to make some real changes with his softer approach. By bringing unions and employers together, Hollande is hoping to emulate the kind of breakthrough achieved by German Chancellor Gerhard Schroeder a decade ago, when he launched deep reforms that revived the moribund German economy.

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BEARDSLEY: This Home Depot-type store in Paris does a booming business on the weekends - at least on Saturdays; on Sundays, it's closed. French stores are allowed to open a maximum of five Sundays a year, unless they are directly involved in the tourist or sports industry. Unions are in a heated battle with several major French retailers, to keep it that way.

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BEARDSLEY: Recently, workers picketed outside Madame Parisot's Small Business Federation. Mohammed Elakermi explains what's at stake.

MOHAMMED ELAKERMI: The kids are off, of course, on Sundays. And the rest of the week, they're in school. So if there's no Sunday to spend with the family, then what other day are we going to spend? And moreover, we think that workers are more productive when they have that time off with their family.

BEARDSLEY: Hollande, whose poll numbers have been falling, has the unenviable task of trying to boost job creation and competitiveness while protecting the French way of life. Pundits predict 2013 will be a most difficult year for everyone - workers, unions, bosses and especially, the French president.

Eleanor Beardsley, NPR News, Paris.

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