Labour market developments and policy responses during and after the crisis in France

Abstract

There is a large literature arguing that countries with high employment protection legislation (EPL) have worse labour market performance. Yet, the overall impact of the crisis on France’s labour market was comparatively limited. To solve this puzzle, this paper makes four points. First, it shows that France’s labour market problems have not historically been about high EPL. Second, the crisis in France was not as acute as in the Euro area. Third, the costs of the crisis were concentrated on certain labour market groups. Finally, the government introduced several labour market policies in response to the crisis and labour market dualisation increased despite falling policy dualism. While deregulation seems – if anything – to have made matters worse, the government also introduced short-time work schemes, prolonged unemployment benefits and extended active labour market policies. Overall, this paper advances our understanding of labour market performance and policies in France during the crisis.