The unemployment insurance reform: the new compensation rules planned by the government

Without waiting for the Folketing’s final adoption of the bill on unemployment insurance, the Ministry of Labor is already working on the new reform. The text, which has just been adopted by the National Assembly, gives the government in particular the opportunity to change the rules for unemployment insurance by decree. But as Emmanuel Macron has promised on several occasions, the executive branch wants to make the regime countercyclical. In other words, the compensation rules would develop in line with the situation on the labor market, becoming more protective in the event of deterioration and, conversely, more stringent in the event of an upswing.

The Ministry of Labor has already invited the social partners to start hearings on the subject from Monday 17 October, just one year after the entry into force of the much-discussed new method for calculating allowances, the main goal of the first reform. This first meeting was to be followed by two other meetings before the end of November with a view to the implementation in early 2023 of the modulation of the allowance rules. In this connection, the Labor Minister Olivier Dussopt’s office sent the trade unions and employers’ organizations a document which will serve as support for the consultations.

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This working document first takes stock of the situation on the labor market before describing the first reform paths that the government has planned. According to the Ministry of Labour, the current economic context thus “justifies” the “quick” installation of countercyclical social security regulations. “The greater generosity of the unemployment insurance scheme in France compared to other countries has been introduced gradually to respond to a persistent situation of mass unemployment and weak demand for labour. But while unemployment is rather on a downward trend, it seems necessary to increase the incentive nature of the system and to facilitate job creation”, writes the cabinet at 127 rue de Grenelle.

Traced by a reduction in the amount of unemployment benefits dismissed

Inspired by the Canadian model, the government is already putting forward a few ideas in its working document, which will be discussed with the social partners. Several rules on daily allowance may change depending on the situation on the labor market. If the Ministry of Labor “from the start” rules out gradation of the size of unemployment benefits according to the economic situation, two other parameters could be changed: the conditions for opening a new right to unemployment and the duration of the compensation.

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Currently, it is necessary to have worked at least 6 months over a reference period of 24 months to access unemployment insurance. Under the new reform, the modulation of this parameter could take different forms. Thus, in the event of an improvement in the economic health of France, it may be a question of “passing from 6 to 7 or 8 months” the working time required to open a new right to unemployment, or of requiring 6 months of work at least over a reference period of “18 months instead of 24”, Olivier Dussopt had detailed france infoon September 7.

Conversely, the rules will be relaxed in the event of a crisis: less than 6 months of work may be required, or the reference period may exceed 24 months to facilitate access to unemployment benefits. Such a measure “has an immediate and rapid effect on entry into unemployment insurance: it makes it possible in the event of a crisis to cover people who are just below (6 months of work, ed. note) but who cannot find a job due to of the fall in the demand for work, and in the event of a recovery, to encourage the resumption of employment to reach the new eligibility limit or accumulate sufficient rights under the attachment reference” , Olivier Dussopt’s office reasons in its working document.

As for the duration of the compensation, which is a maximum of 24 months today (or even 36 for people over 53), all scenarios are again possible. But the Ministry of Labor seems to prefer the track of a graduation like in Canada, which, for example, extends the duration of the compensation by two weeks every time the unemployment rate rises by one point.

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With regard to the indicators that must be taken into account in order to change the rules for unemployment benefits, the Ministry of Labor presents three options. The first would be to consider only the unemployment rate and possibly its variations. According to the executive board, it is a “privileged” indicator for analyzing behavior on the labor market, which “also has the advantage that it is the best known to the general public and therefore the most readable”. Another option would be to retain stress indicators, such as recruitment difficulties or staff shortages, which are measured by various business surveys or by the ratio of the number of people employed for more than a month to the number of unemployed. “However, these indicators are rather broadly correlated with unemployment, both in terms of responsiveness to the cycle and the intensity of the reactions”, emphasizes Olivier Dussopt’s cabinet.

A territorial development of non-privileged compensation rules

Last resort, finally: rely on indicators of economic activity (growth, business climate, etc.). But the ministry already sets a limit: “The labor market reacts with a certain delay in relation to these indicators.” In addition to the choice of economic factors to be taken into account, the government also intends to discuss when the development of the retained indicator(s) should lead to a change in the unemployment benefit rules. In this connection, the Ministry of Labor proposes that an “advisory committee of experts” be set up, which, in the event of exceeding the threshold for the selected indicators, will be responsible for “giving its assessment of the situation on the labor market and its recommendations on whether the new planned parameters must be used”.

In any case, the track of an analysis of the health of the labor market and thus a graduation of the rules for unemployment benefits at a regional level (and not nationally) does not seem to have the government’s advantages. “In addition to the complexity it generates, such territorialization can have negative effects such as limiting the mobility of job seekers, slowing down job creation in areas that are already the least favored, but there is currently little empirical evidence”, we read in the working document sent by the ministry, which also warns of risks of creating inequalities between territories. This would effectively mean that job seekers would not enjoy the same unemployment rights from one region to another, depending on the economic health of the territory.

It will finally be seen whether these new rules will apply to all jobseekers – and thus also to those who already benefit from a right to unemployment – ​​or only to newcomers. This question, “delicate” in the words of Olivier Dussopt’s entourage, will also have to be decided within the framework of consultation with the social partners.

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