French new labor law applies less employer restrictions, Egyptian law applies more, yet both target increasing employment

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Unemployment rate in France has been sustained at an alarming level of above 8% since the second half of the 1980s.  It is currently at 9.7% with companies finding difficulties hiring even with the presence of offers which means for economists that France is hitting up against structural unemployment — or unemployment that doesn’t disappear even when demand for goods and services powers growth in gross domestic product.  “We have 2 million unemployed who lack the qualifications to fill jobs,” President Macron told reporters in Paris in Feb 2018. “That’s what is worrying,” Bloomberg.   This is why Macron’s government has introduced a new labor law giving companies greater flexibility in dealing with cyclical trends, technological transformations and the challenges arising  from globalization. The new law focuses on two key vectors: providing companies with greater flexibility to manage their headcount, and  placing greater emphasis on company-level negotiations when establishing labor standards, BNP Paribas economic research.  In other words, the new law is making it easier for companies to offer voluntary dismissals and offers multinationals fewer hurdles in laying off staff at struggling French operations.  Likewise, it reduces the authority of labor syndicates in negotiating employment conditions for small businesses (less than 20 employees) and allows employers-workers more freedom to agree on favorable working terms.  In efforts to face the unskilled worker occurrences Macro’s government pledged to invest 15 billion euros in education and vocational training to revamp the apprenticeship system.

On the other side of the Mediterranean Sea in Egypt the situation is a little different.  Although due to economic reforms by Sisi’s government, unemployment rate dropped from 12.5% in 2016 to 11.8% in the following year as noted by state statistics agency CAPMAS, Reuters, the Egyptian government is targeting to boost private sector employment versus the public one.  The labor committee in the Egyptian parliament has finalized a new labor law draft in end of 2017 that grants more security to private sector employees.  Private companies practice before this law was to cohere their new hirees to sign resignation forms (Estemara sitta) along with their employment contracts to avoid litigation when they need to dismiss them.  The new law tackles this problem by requiring that all resignations under the new law must be supervised by administrative authority representatives.   The draft law also stipulates that the government shall establish new labor courts to expedite settlement in employment cases.  It furthermore demands that working hours shall include one or two periods for eating and rest, not less than a total of one hour, on the condition that the worker shall not work for more than five consecutive hours. Employees shall also be entitled to annual leave, not including official holidays, feasts, and weekends, up to 15 days in the first year, 21 days in the second year, 30 days for those who spent 10 years or more, and 45 days for those aged 50 years old or older and people with special needs.   Temporary contracts used to be renewed annually to become permanent contracts after four years. Under the new law, temporary workers can still be dismissed at any time as the employer can present a memorandum to the court or the Ministry of Manpower to demand the abandoning of any employee. However, the new draft law guarantees those workers the right to receive their payment as long as the contract is renewed. The new law requires employers who dismiss any temporary worker to pay them two months’ worth of wages for each year of service, Daily News Egypt.

In 2014 Virgile Chassagnon and Bernard Baudry authored a review analysis of employment relationship in contract economic theories in which they compared the French system to the American one.  It was a comparison between a political model (the French case) and an economic model (the United States case).  In their paper they concluded that French legislators usually try to reduce the asymmetry of power between employer and employee and to limit the discretionary decisions made by employers. Contract economic theories do not seem to consider this balancing of power as important in the regulation of the employment relationship as compared notably to the benefits of employment at-will and pure private ordering. This of course is a consistent finding in a comparison between a politically driven system (where there is higher priority of social security and public demands) versus an economic efficiency drive (where growth has the top priority).  The dilemma is that Egypt in a current state where it has an existential need of rapid economical growth.  On the other hand, the country just came out of two revolutions therefore public expectations of social security is sky high.  Will this new law balance the equation?   Should we go more American or more French? A tough question facing Sisi’s administration remains to be answered after enforcement of the new law.

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