Assessing the recent labour market agreement in France

Gilles Saint‑Paul, Professor at the Toulouse School of Economics, takes a look at the labour market reforms agreed to recently in France. He sees a positive side in that flexibility increases for firms, in particular the reduction in the non-wage costs firms' face when deciding to get rid of a worker, but a negative side-effect is that the incentive to remain unemployed has somewhat increased. Saint-Paul notes that the risk of opportunistic behaviour by firms and workers with respect to the unemployment benefit system has not been taken into account and this needs to be addressed.