Unemployment insurance: here are the potential losers of the new reform implemented by the government

A good start to the new unemployment insurance reform. On Monday 17 October, the Ministry of Labor started consultations with the social partners to discuss the new unemployment benefit rules that the executive board wants to put in place. As a reminder, the “full employment” bill, passed by the National Assembly on October 11 and still pending validation by the Senate, allows the government to change the unemployment insurance rules by decree after a consultation phase with trade unions and employers’ organizations. And this until 31 December 2023.

In this connection, the Ministry of Labor sent a working document to the social partners, in which it presents its first ways for reforms. The aim is to make the scheme “cyclical”: the compensation rules will be more protective in case of a deterioration in the country’s economic health and stricter if the situation improves. Several parameters could be made to develop within the framework of this new reform of unemployment insurance: the conditions for opening a new right and the total duration of compensation.

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The unemployment insurance reform: the new compensation rules planned by the government

New meetings are to be held with each trade union and employers’ organization in the coming weeks, before a final agreement is scheduled for November 21. The idea is ideally to apply the new social security fund rules from the beginning of next year. Even before waiting for the instructions of the Ministry of Labor to materialize, Unédic, the body responsible for the administration of the unemployment insurance, has already carried out an initial study aimed at assessing the effect this new reform would have. .

This document, which Capital was able to consult, makes it possible to quantify some of the measures planned by the government. However, these first results must be considered “with caution”, Unédic stresses, because they depend to a large extent on the final choices that the government will make to implement its new unemployment insurance reform.

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An increase in the number of required months of work will mainly affect the most insecure

Regarding the conditions for opening a new right to unemployment insurance, two parameters may change depending on the economic health of the country. On the one hand, the Ministry of Labor plans to gamble on the number of months of work required to gain access to unemployment benefits. Today, it is necessary to have worked 6 months over a reference period of 24 months (36 months for people over 53) to release a new right. In the event of an economic recovery, the required working time may increase to e.g. 7 or 8 months. Conversely, in the event of a crisis, less than 6 months of work may be required. According to Unédic’s calculations, “an increase of one month (in the required attachment conditions, editor’s note) would lead to a reduction of around 100,000 in the annual number of rights”.

The effects of this measure, which would be “immediate”, “would lead to a reduction in expenditure of 400 to 500 million euros per additional month of connection needs”, adds Unédic, who also emphasizes that a gradation of the conditions for opening a new right will mainly affect the “least qualified and young” profiles, as well as “the end of fixed-term contracts and temporary work”.

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The graduation of the reference period will have an impact on the size of the allowance

Second track mentioned to allow a graduation of the conditions for opening a new right: playback of the reference period taken into account, which is currently 24 months in the general case, or even 36 months for people over 53 years old. The idea could therefore be to reduce it to 18 months in the event of an improvement in the labor market for those under 53 or, conversely, to increase it to 30 months in the event of a crisis. At the moment, it is complex to understand the effects of such a development, because it depends on the distribution of employment periods and inter-contracts (periods of inactivity between two employment contracts, ed. note) and on the level of wages received”, states Unédic in his study .

According to this document, the measure could also lead to a change in the amount of unemployment benefit received: by reducing the reference period, for example, certain employment contracts (and therefore certain wages) or certain periods of inactivity could no longer be taken into account and therefore raise or lower it final amount for the daily allowance received. Labor Minister Olivier Dussopt, however, ruled out the possibility of adjusting the amount of unemployment benefits according to the economic situation. It is therefore an “indirect effect that needs to be monitored”, the minister’s office stated. Understand: this track may ultimately be scrapped given the impact it would have on the amount job seekers receive.

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A reduction in the duration of the compensation could affect up to 300,000 jobseekers

As for the development (up or down) of the duration of the compensation according to the economic situation in France, it can take different forms here too. A first clue would be to modulate it by applying a “decreasing” or “increasing” coefficient. Currently, according to the Ministry of Labour, this coefficient is 1: If you have worked 6 months during the last 24 months, you are entitled to 6 months of unemployment. In the event of an economic recovery, the idea could therefore be to reduce this coefficient to 0.8, according to the hypothesis adopted by Unédic in his study. In this case, a job seeker who would have worked 6 months over a reference period of 24 months will only be entitled to 4.8 months of unemployment.

Still on the assumption that a reduction coefficient of 0.8 would be applied, the measure would logically have an impact on all jobseekers who currently “consume” more than 80% of their entitlement (which remains more than 4.8 months unemployment for unemployed people who have worked 6 months during the last 24 months, for example). At full speed, i.e. after approximately five years, according to Unédic, this measure could lead to an increase each year in the number of people who reach the end of their right to unemployment. And this in the order of 100,000 to 300,000, depending on the retained reduction coefficient. “The number of beneficiaries compensated by the unemployment insurance may decrease by the same order of magnitude,” adds Unédic.

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The impact of a reduction in the maximum compensation duration has not been assessed

Another possibility to modulate the duration of the compensation: act directly on the maximum entitlement for beneficiaries. It would be a matter of defining new maximum durations of compensation, for example by reducing them in the event of favorable economic conditions or, conversely, by increasing them in the event of a crisis. In his study, Unédic does not assess what effect such a measure would have, although it is a track regularly advanced by Olivier Dussopt.

Finally, the Ministry of Labor raised the possibility of extending the duration of the compensation, as during the crisis in connection with Covid-19, for unemployed people who have reached the end of their right. But for Unédic, this measure raises several questions: how many extra months of compensation will be provided in this context, would the allowance be the same for everyone, or would it vary depending on the jobseeker’s profiles? compensation period is resumed upon interruption of compensation linked to the resumption of activity etc.

So many questions that the Ministry of Labor will have to answer before the implementation of the new reform. Above all, he has to decide which parameters should be changed according to the economic health of the country and according to which criteria. For the time being, no arbitration has taken place after the first meeting with the social partners on Monday.

And the discussions promise to be complicated. Although the government’s project is still vague, the unions warn of the risks of this new reform. “The government’s plan is unfair, and if the tracks presented on Monday are put in place, there are very dark days ahead for job seekers,” said Eric Courpotin, federal secretary of the CFTC. “We are opposed to any measure that allows for the modulation of unemployment compensation”, overbids Michel Beaugas, federal secretary of the Force Ouvrière, who does not rule out the possibility of taking legal action against the decrees implementing this new reform, if necessary.