France must simplify life to save economy: OECD

France must simplify life to save economy: OECD
President Francois Holande must continue to reform labour market says the OECD. Photo: AFP
France needs a massive drive to simplify everything from the labour code to taxes and business regulations, the liberal economic think tank OECD argued in its annual economic survey. We've summed up exactly what it wants France to do.

The liberal economic think tank OECD made it clear on Thursday exactly what is wrong with France and what it needs to do to dig itself out of the economic doldrums.

The Organisation for Economic Co-operation and Development laid into France in its economic survey of the country, published on Thursday, telling Paris that it needs to dramatically simplify life for businesses and workers if it wants to arrest its flagging economy.

While the OECD noted France’s “enviable standard of living”, “high productivity” and “only average income inequality that hasn't worsened despite the crisis” the think tank said the country's economic recovery has been slow and unemployment was still rising.  

The country is in urgent need of simplification to unravel its “significant complexity of systems and institutions," the report concluded although it did compliment France on the "welcome pro-growth structural reforms" it has already made.

Economists from the OECD, who presented their report to France’s Finance Minister Michel Sapin on Thursday, said the government really needs make reform of the labour market its top priority.

It criticises the “strong protection” afforded to those workers on long open-ended contracts which is “hindering mobility” and the country’s notorious 3,000- page long labour code which it says "restricts flexibility in both the private and public sectors".

The report also blasts France over its public spending levels, “which at 57 percent of GDP is among the highest in the OECD and imposes a heavy burden on economic performance.”

The think tank also targets France’s numerous layers of regional bureaucracy, known as the “mille-feuilles” (thousand leaves) particularly the country’s 36,000 communities, which weighs heavy on public spending.

“Operating expenses, public-sector employment and social spending are all greater than in most other EU countries and there are too many sub-central governments with overlapping responsibilities,” said the report.

It also took aim at the vocational education system, which it says “fails to provide many with the skills they need to be hired”.

So what does France need to do to remedy its economy?                   

The OECD has laid out a long list of recommendations for the path it thinks Paris should follow to achieve economic recovery.

  • “Simplification on a broad scale” – Simplification was a word which popped up time and again, whether it was bureaucracy or shop opening hours. But most significantly the OECD says it is the country’s labour code that needs a real streamlining. France must “step up efforts to reduce complexity in the labour code, business norms and regulations, the structure of sub-central government, taxation and pensions,” the report said. So pretty much everything.
  • Cut taxes on labour – French companies have one of the highest payroll tax burdens in Europe and the OECD says it needs to be lessened.
  • Close small public hospitals – This is one of the measures the OECD believes France should take to cut public spending. It should also place a greater emphasis on outpatient surgery, which as it happens is exactly one of the measures the Minister of Health plans to take. Doctors should also be given greater incentive to limit prescriptions to French patients, renowned for being pill-poppers.
  • Cut the number of communes – France has around 36,000 communes, way too many according to the OECD. The government should group many of these communes together under one hat. There’ll be a few local mayors who might have a thing or to say about that.
  • Reform unemployment benefits – France is considered among the  most generous countries in the world when it comes to unemployment benefit, but a little too generous according to the OECD. The think tank says “the parametres” of the benefits system should be altered, “especially the duration”.
  • Education, education, education – The OECD says France can remedy the failures of its vocational education system by “hiring teachers who combine teaching with professional experience outside education” and provide those students who lack skills with more individual support.
  • Review regulations – France needs to employ an independent organisation “to conduct a thorough review of all existing and proposed regulations affecting firms,” the OECD says.
  • Eliminate restrictions on shop opening hours – This has been a controversial issue for some time and although France has moved to allow more Sunday shopping, Paris is unlikely to become a 24-hour shop till you drop city like New York just yet. The powerful unions will have a say about that.

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