Next steps in the Macron revolution

French President Emmanuel Macron has accomplished more in six months than his predecessor managed in five years. Trouble is,
that’s a low bar — and Macron will need to keep pushing if France’s economy is to achieve its full potential.
Macron’s first phase of reforms addressed the country’s 3,000-plus pages of labor rules. The changes are aimed at lightening the burden of regulation on employers — for instance, by letting more of them negotiate terms directly with employees. They’re valuable, especially for the small and medium-sized firms that account for nearly half of France’s workforce. The new rules will also make it easier for multinationals to fire workers at struggling French subsidiaries — encouraging them to hire more
workers when times are good.
Yet these changes, welcome as they are, don’t go far enough. Macron agrees, and he’s embarking on a more ambitious second phase of reforms to help tackle France’s biggest labor-market problem: an unemployment rate that has stood at roughly 10 percent for years. Europe’s cyclical recovery has helped to get joblessness down a bit lately, but around a quarter of France’s young people are still looking for work. Government spending isn’t the issue. (France already spends generously on finding jobs for the unemployed.) The real obstacles are housing and skills.
Affordable homes are in short supply, especially in the cities where jobs are more plentiful. And France’s system of subsidised accommodation often ties workers to particular places — in many cases with non-transferable lifetime rights. As well as reforming those rules, France needs to build more low-cost housing and supporting infrastructure in disadvantaged areas. At the moment, local authorities often block new construction.
Skills should be the other priority. France’s highly centralised education system has failed to deal effectively with low levels of literacy and a lack of skills for digital economy. Vocational training has also been weak — plagued by a huge number of competing approaches, and run by officials who see
little value in apprenticeships, which have proved so effective elsewhere. Macron is making a start on broader educational reform — reducing class sizes in poorer areas and giving universities more autonomy — but this won’t yield quick results. Reforming country’s apprenticeship program may be the best and fastest way to improve the job prospects of French youth.
The most successful apprenticeship programs, like those in Germany and Switzerland, emphasize on-the-job training and encourage businesses to help devise the programs. France’s system relies more on classroom instruction. This approach fails to reach the students who most need help, and participation of unskilled youngsters has been dropping.
Macron wants to simplify the system and get employers more involved. This might not be easy: It will mean reducing the role of France’s powerful ministry of education. It’s essential nonetheless.
This second phase of reform, even more than the first wave, will upset some unions and a lot of civil servants accustomed to getting their way. Macron needs to stick with it. His opponents are divided, which helps, and his commitment to change seem undimmed. He’s achieved a lot already. Best of all, he seems to understand that there’s a lot more to do.

—Bloomberg