Eric Pfanner International Herald Tribune Saturday, June 15, 2002 VALENCIENNES, France At 1:15 p.m., workers at a Toyota plant here finish the early 7-hour shift. Thanks to France's 35-hour work week, "We are going to work less and have more and more hobbies," says Afekir Ahmed, a union leader. . While workers enjoy more leisure, Toyota's bosses are happy, too: Productivity is strong, and they are stepping up output and hiring 300 more workers. Unemployment in this long-depressed area, where miners revolted against the plutocrats in Emile Zola's "Germinal," has fallen from more than 20 percent to the mid-teens since the work week was shortened. . But what has proved a positive experience for Toyota and its workers has turned into a hardship for a small-business owner, Claire de Circourt. Pacing her nearly deserted offices in Paris, she complains that the shorter work week wreaks havoc on her staff scheduling. . "Where are they?" asks De Circourt, who runs two companies that rent and manage apartments for expatriate executives. "Who is going to find any clients for me?" . The 35-hour work week, hailed and cursed in equal degree as a radical experiment in economic engineering when it was introduced by the Socialist government of then-Prime Minister Lionel Jospin, has indeed transformed the country's workplaces. But the results have surprised economists as well as politicians like Jospin, who recently lost his job in part because of frustration over side effects of the law. . Contrary to some of the worst fears, France has thrived during the transition. It has become the economic engine of the euro zone, with average annual growth of 3.1 percent over the last four years, compared with 2.6 percent for the single-currency bloc as a whole and 1.8 percent for its biggest member, Germany. The jobless rate has fallen from 12 percent in 1998, when the law mandating the 35-hour work week was passed, to 9.1 percent, and consumers, with more time on their hands, have gone on a spending spree. . But economists worry that the short-term gains could cost the country its long-term competitiveness. Hiring incentives and other sweeteners intended to assuage big business have stimulated the economy, but they are costing the government $15 billion a year, roughly 1 percent of gross domestic product, according to SG Securities. . More dangerously, analysts say, the extension of the 35-hour work week to small companies this year threatens France's most vibrant job machines. Because they are heavily engaged in labor-intensive services, it is harder for them to make up for lost time. . "In the long term, it's a significant threat to job creation and growth," said Christel Rendu de Lint, an economist at Morgan Stanley. "For small firms, it could be a disaster." . With the complaints of small businesses fresh in their ears, right-wing lawmakers are likely to ease some of the provisions of the law that cut the work week if, as expected, they win a parliamentary majority in the second round of national voting Sunday. But analysts say they are extremely unlikely to scrap the experiment entirely, particularly as evidence of its effects remains mixed. . Splitting up the employment pie by limiting the work week created 235,000 new jobs through the end of 2000, when the law took effect for big companies, according to government figures. Thirty percent of job creation in 2000 was attributed directly to the reduction of working hours, though Christophe Duval-Kieffer, an economist at Credit Suisse First Boston, says the actual percentage - counting the indirect effects such as increased incomes and spending - may be higher. . Still, though companies were given incentives to hire, in the form of rebates and reductions to the country's high social charges, many big manufacturers eschewed them. Instead, they took advantage of flexibility measures included in the work week reduction law to operate more efficiently with the same number of workers. As a result, productivity soared as workers were paid the same amount to work 35 hours instead of 39. . Meanwhile, total payroll costs fell even as hourly wages rose, according to Duval-Kieffer. "For corporations, there have clearly been some positive effects," he said, "notably the ability to lower social charges and to increase flexibility." . While big companies can shift schedules relatively easily to cover for absent employees, for small companies the new law has been difficult to impose, even though the deadline was delayed until this year for those with 20 or fewer employees. Yet these enterprises, mostly in service fields, are the ones that have generated the lion's share of new jobs in recent years. . Entrepreneurs say regulators have made matters worse with intrusive enforcement of the measures. They complain of frequent visits from labor inspectors looking for lights on in offices after normal hours and counting cars in the company parking lots. . "It just opened the door to them to come and harass you," said De Circourt, whose two companies employ 15 people. . Last year, amid complaints, the government sought to ease the transition for small companies. Like big companies, they can keep workers on a 39-hour-a-week schedule, provided they give them an extra two weeks of vacation. But while big companies had to do so all at once, those with fewer than 20 workers can phase in the extra time off over several years. . Still, even that can be a burden. One of De Circourt's employees recently approached her, a copy of the workplace regulations in hand, as he planned time off for his wedding. The rules said he could get six extra days off for the event, in addition to five weeks' paid vacation, 13 holidays and the four additional days he gets this year because the office still operates on a 39-hour work week. . "Then he had the nerve to ask me for a raise," she said. "He didn't get it." . Employees can be bold because good ones are getting harder to find. Jack Anderson, a senior partner at Ernst Young in Paris, estimates that the country's structural unemployment rate - the level below which tight demand creates inflationary strains - is as high as 10 percent, given the generous benefits that the unemployed enjoy in France. . With the jobless rate below that level, De Circourt says she finds few qualified candidates - particularly when they find that her office is still on a 39-hour schedule. "They don't care about the extra days off. They'd rather work 35 hours," she said. "If they want extra days, all they have to do is get a note from their doctor." . Simply figuring out how to put the new rules in place can be difficult for small companies. The French Employment and Labor Ministry's Web site detailing the 35-hour work week runs to hundreds of pages. . Because the shorter work week was intended to lower the jobless rate, companies were given financial incentives to make up for the lost time with new hiring. But applying the benefits requires new calculations and paperwork. Companies get E636.32, or about $600, from the government each year for each new worker they add because of a documented reduction in working hours. The law also extends a previous reduction in social contributions for low-paid workers, based on a sliding scale linked to the minimum wage. . In the Valenciennes area, where many mines, steel mills and textile factories closed years ago, Toyota took advantage of the reduced social charges to hire 2,200 workers. . Perhaps because 45 percent of those workers were unemployed at the time, Toyota officials say their work force is surprisingly motivated. There have been no work stoppages, an unusual experience in a country where strikes generally signal the opening, not the breakdown, of labor negotiations. . "It's much better than we feared," said Toshiharu Takasu, president of Toyota Motor Manufacturing France. The work force, he added, is more skilled than the one at a plant in the United States where he used to be posted, though "maybe not quite as good as Japan." . Toyota was able to take advantage of flexibility measures in the 35-hour work week from the start, because the law took effect just as the company was gearing up for production of its popular Yaris model at Valenciennes. The plant operates on two shifts, and the assembly line can keep operating beyond regular hours, or on weekends, through the use of limited amounts of overtime if production falls behind. . Like other employers, Toyota benefits from sweeteners that were included in the 35-hour law to get it past the opposition of business leaders. One is a change in the definition of the work day: Unlike before, breaks are not counted as working time. The biggest benefit for manufacturers is a measure that allows them to "annualize" the work week: Schedules must average 35 hours over the course of a year but can exceed that amount during some weeks if the company provides time off later. . "If you are in a business with seasonal variation in demand, the law is quite useful," said Claude Boulle, vice president for administration at Toyota. The Valenciennes plant is adding 300 more workers as production of the Yaris increases. . Some long-established factories, however, are holding the line. At a Ford plant in Bordeaux that makes transmissions, managers decided to spurn the financial incentives to add to their staff of 3,600 as the work week was shortened. "For us, the 35 hours is just a fact of life," said Roland Especel, a spokesman. "We have not been hiring, that's for sure." . Economists worry that foreign investors will be deterred, too. So far, the evidence is mixed. Foreign direct investment totaled $44 billion in 2000, more than double the 1997 total. But during that time, France fell to sixth from second among European nations as a recipient of foreign investment, according to figures from Ernst Young. . Investment outflows from France soared, too, although that can be seen as a sign of corporate strength. Overseas buying sprees by companies such as Vivendi, Electricite de France and France Telecom reflect the country's ambivalent coming-to-terms with globalization. . Anderson notes that Forbes Global magazine recently ranked France first on its "misery index," a gauge of worldwide taxation rates. "The fact that we pay more taxes to get rebates - I wouldn't dare tell my clients that's a competitive advantage," he said. . Indeed, companies with a choice may decide to go elsewhere. While Valenciennes was a good location for Toyota - in addition to the ready availability of skilled labor, it is close to the big population clusters of Paris, Belgium, the Netherlands and northern Germany - companies in dynamic industries like technology may have greater geographical flexibility. . Eric Benhamou, a Frenchman who is chairman of the American high-tech companies 3Com and Palm, says he plans no further investments in his native country anytime soon. Each company has about 100 employees in France, but no factories or logistics and support centers. Instead, his companies are focusing on Britain, Ireland and Israel. . "This is just one other thing that contributes to the rigidities of the French economy," he said of the 35-hour work week. "It's the straw that breaks the camel's back against deciding to invest in France." . While workers in some other European countries spend even less time at work - some Volkswagen factory workers in Germany have a 28.8-hour week - those agreements were reached through individual bargaining agreements that offer employers greater flexibility, rather than through France's rigidly imposed nationwide system. . Because the effects of the shorter work week remain unclear - and because of the formidable street presence of the French unions - no one expects the right-wing parties supporting President Jacques Chirac to get rid of the law when they gain their expected majority in Parliament. But some restrictions will probably be loosened. Most likely, analysts say, are efforts to ease the pain for small companies, as well as a higher limit on overtime. . In the meantime, the law has kept schedules full for one group of workers: Paris taxi drivers. As more Parisians take advantage of their "RTT" - reduction du temps de travail, or working time reduction - the traditional Friday night rush to get out of town has lengthened. Taxi drivers say they are busier than ever on Thursday nights, when the national railway has added extra trains to the south of France. < < Back to Start of Article VALENCIENNES, France At 1:15 p.m., workers at a Toyota plant here finish the early 7-hour shift. Thanks to France's 35-hour work week, "We are going to work less and have more and more hobbies," says Afekir Ahmed, a union leader. . While workers enjoy more leisure, Toyota's bosses are happy, too: Productivity is strong, and they are stepping up output and hiring 300 more workers. Unemployment in this long-depressed area, where miners revolted against the plutocrats in Emile Zola's "Germinal," has fallen from more than 20 percent to the mid-teens since the work week was shortened. . But what has proved a positive experience for Toyota and its workers has turned into a hardship for a small-business owner, Claire de Circourt. Pacing her nearly deserted offices in Paris, she complains that the shorter work week wreaks havoc on her staff scheduling. . "Where are they?" asks De Circourt, who runs two companies that rent and manage apartments for expatriate executives. "Who is going to find any clients for me?" . The 35-hour work week, hailed and cursed in equal degree as a radical experiment in economic engineering when it was introduced by the Socialist government of then-Prime Minister Lionel Jospin, has indeed transformed the country's workplaces. But the results have surprised economists as well as politicians like Jospin, who recently lost his job in part because of frustration over side effects of the law. . Contrary to some of the worst fears, France has thrived during the transition. It has become the economic engine of the euro zone, with average annual growth of 3.1 percent over the last four years, compared with 2.6 percent for the single-currency bloc as a whole and 1.8 percent for its biggest member, Germany. The jobless rate has fallen from 12 percent in 1998, when the law mandating the 35-hour work week was passed, to 9.1 percent, and consumers, with more time on their hands, have gone on a spending spree. Con't:
http://iht.com/articles/61446.html