“At the peak, 40 percent of the French labour force were on short-time work”

In France, just like in many other European countries, short-time work has proved to be a powerful tool to prevent massive layoffs during the Covid-19 pandemic. The traditional French short-time work scheme (“Activité partielle”) has been in place since 1951. In this interview, Pierre Cahuc, Professor of Economics at Sciences Po in Paris, will give some insights into the French approach to short-time work and the lessons learnt from applying the instrument during the Covid-19 crisis.

How has the importance of the French short-time work scheme changed over time?

The “Activité partielle”, also often called “chômage partiel” (partial unemployment, our translation) in the media, was mainly used in the manufacturing sector on a very small scale. Its importance grew during and after the 2008/2009 recession. Its use literally exploded during the Covid-19 pandemic. At the peak, about 40 percent of the labour force were on short-time work.

What are the objectives of the scheme?

In France, there are six potential valid motives when requesting acceptance into short-time work: (i) the economic situation; (ii) modernization, restructuring and transformation; (iii) problems in the provision of raw materials and energy; (iv) accident; (v) exceptionally adverse weather conditions; (vi) other exceptional circumstances. The extension of the scheme during the pandemic was implemented based on this institutional structure.

What were the changes in the system during the Covid-19 pandemic?

In July 2020 France instituted a long-term short-time work scheme (“activité partielle de longue durée”). Benefits can be paid up to 36 months, which may or may not be consecutive, over a period of 48 months. However, the long-term short-time work scheme can no longer be implemented in a company since 1 January 2023. The measures put in place before this date may be applied until 31 December 2026 at the latest.

The net replacement ratio has been increased to 100 percent for minimum wage earners

Has the benefit level also been changed during the pandemic?

Yes, the generosity of the scheme increased sharply during the Covid-19 crisis, but was reduced afterwards. In addition, the scheme has been extended to temporary jobs. At the peak, the net replacement ratio has been increased to 100 percent for minimum wage earners and to 84 percent for higher wages up to a maximum of 4.5 times the minimum wage. This ceiling covers more than 95 percent of wage earners. One may add that collective agreements played only a marginal role in that respect.

How is the scheme financed?

One third by unemployment insurance and two thirds by the government.

Are there any measures to avoid misuse and deadweight losses by supported firms that actually do not need financial support?

No, there is only a priori control of the administration.

It is likely that the long-term short-time work scheme slows down the reallocation of jobs

Did the support system in your view slow down the necessary reallocation processes in the economy?

There is no evaluation in France on this issue, but it is likely that the long-term short-time work scheme mentioned above slows down the reallocation of jobs.

Is there a financial incentive for employers to offer on-the-job training for their employees while receiving support?

Employers are invited to optimise periods of reduced activity to train their employees and improve their qualifications. They can train employees during periods of inactivity and obtain partial support from the State for the educational costs of training employees in partial activity within the framework of the Employment National Fund (“Fonds National pour l’Emploi”). This fund participates in the financing of vocational training, partial unemployment, early retirement and the reduction of working time by organising agreements with private and public employment stakeholders.

Has this incentive in your view proven effective?

As far as I am aware, there is no available evaluation of the impact of these financial incentives during the pandemic.

Have there been incentives for benefit recipients to look for a new job?

Outside working hours, due to the suspension of the employment contract, the contractual obligations are suspended. Therefore, it is possible for an employee to take another job. But there are no specific financial incentives apart from this possibility.

At the onset of the pandemic, an application for short-time work benefits was considered approved if the authorities did not make a decision within 14 days

How effective was the implementation concerning the speed and bureaucratic ease of support and concerning potential abuse of the system?

The authorisation procedure was simplified from March 2020 onward. In particular, at the onset of the pandemic, an application for short-time work benefits was considered approved if the authorities did not make a decision within 14 days. This simplification facilitated the use of short-time work, with some abuse, which looks very marginal (less than 1 percent of total expenditure), according to available empirical evidence.

When will the special rules that applied during the pandemic be phased out?

The phase-out was progressive. After the summer of 2020, the generous short-time work scheme was limited to companies subject to administrative closure. The long-term short-time work scheme can no longer be implemented in a company since 1 January 2023.

Is there a political debate on whether to include elements of experience rating?

Not in France. Stakeholders who support the scheme have no interest in discussing this issue and the limited size of the expenditure associated to this scheme in normal times implies that this issue is of second order for tax payers.

Personal Details

Pierre Cahuc is Professor of Economics at Science Po since 2018. Before that he was Professor at École Polytechnique and at École nationale de la statistique et de l’administration économique. He was a member of the Conseil d’Analyse Economique from 2006 to 2010 and from 2012 to 2016.

doi: 10.48720/IAB.FOO.20230516.02