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France – Election implications for staffing companies

07 May 2012

The victory of François Hollande’s Socialist Party could signal changes for French staffing companies. Monsieur Hollande becomes the first Socialist president since François Mitterrand in the 1980’s and his election signals a desire by the French electorate to use positive stimulus measures to revive the economy rather than the austerity approach favoured by outgoing President, Nicholas Sarkozy. The President-elect said last night that he wanted to be judged on his ability to revive the "French dream" which means "fairness to all," new opportunities for "the young" and "better lives, from one generation to the next". 

European politics moved to the right following the economic crisis that broke four years ago and the new French President will likely find himself at odds with his elected neighbours in Germany (Angela Merkel) and the UK (David Cameron). The French Socialist Party never really turned itself into a modern social democratic party in the way most other European socialist parties did during the 1990’s such as the British Labour Party (‘New Labour’) and, according to some observers, this failure to modernise kept the party unelectable until now. However, Françoise Hollande is regarded as a moderate among the left characterized by his campaign persona of ‘Mr Normal’. Among his pre-election promises are commitments to: 

  • spend €20 billion on job creation,
  • establish 150,000 generation contracts to make it more attractive for companies to hire young workers,
  • limit the salaries of bosses of public companies to no more than 20 times the average wage (effectively capping annual earnings at €360,000),
  • allow those who have accumulated 42 years of social security taxes to retire at age 60,
  • impose new taxes on the rich including a 75% tax on marginal incomes of more than €1 million, and 45% for those earning more than €150,000 (up from 41%),
  • combat racial profiling

However, the new President faces a number of challenges; unemployment close to a record high of 10%, a gaping trade deficit, stuttering growth, declining industry and public debt so large that interest repayments alone account for the highest state expenditure after education.

Even before the election, the French labour market was among the most rigid in the OECD and there now seems little prospect of a more liberal approach being adopted (such as changes to the 35 hour working week). French staffing companies have seen the legislative environment improve over recent years including the opening of the public sector for the first time. Now, however, with a socialist President elected on a platform of job growth, temporary work is unlikely to be encouraged over permanent work. Nevertheless, if the new President is successful in stimulating the French economy and getting business growing and hiring again, staffing companies may find the new regime less of a threat than they fear.

Hollande is scheduled to take office on 15 May and his supporters are hoping that the Left could also win the victory in the parliamentary election next month.

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