France started a rigorous lockdown on March, 17, 2020. Schools, restaurants and all shops except pharmacies and groceries were closed. Mobility was authorized for a limited list of motives explicitly listed by a decree released on 24 March. Those who moved were required to have an authorization from their employer or a sworn statement indicating the reason for the trip. Violation of these rules is liable to a fine from 135 euros to 3750 euros and 6 months imprisonment. The rules were stringent: The government announced 15 days after the start of containment that there had been 5.8 million checks and 350,000 fines.
The lockdown started to be released from May 11, but very gradually, with a limited reopening of schools and shops depending on sectors and regions. Restaurants and cafés remained closed until June 2 and schools until the end of June.
As a consequence of this very stringent lockdown, economic activity has slowed sharply in April 2020. The estimate of the loss of economic activity linked to the health crisis is around 28% in April, as shown by Figure 1. However, the rebound in economic activity was very strong from the start of the deconfinement, in May and then in June. It continued, albeit at a slower pace, during the summer months.
At the same time, for several weeks and after a lull during the summer, the spread of the virus has intensified, particularly in large cities. The implementation of new measures to limit social interactions started in mid-October with a second lockdown, less stringent than the first one insofar as schools remained open and people could commute for professional reasons.
However, activity rebounded after the end of the first lockdown, from the third quarter of 2020 (see Figure 1). On average over the year 2021, GDP increased by +7.0% after –8.0% in 2020. The average level of GDP in 2021 is thus 1.6% below its average level in 2019 and the quarterly GDP of the last quarter of 2020 is just above that of the pre-crisis.
Thanks to a very intensive use of short-time work, which covered about half of employees of the private sector at the end of April 2020 (Figure 2), the employment drop has been limited (Figure 3). Between the end of December 2019 and the end of June 2020, salaried employment decreased by 715,000, or -2.8%. This decline, which is unprecedented in magnitude, remains much more limited than the decline in activity (-13.8% in the second quarter after -5.9% in the first). The drop of employment has mainly been due to the freeze of hiring. Hence, young people, have been more impacted whereas the employment rate of senior workers remained almost stable. Then, employment recovered rapidly, and by the third quarter of 2021 the aggregate employment rate is 2 points above its level at the start of the pandemic.
During the period of confinement, a large number of unemployed persons had interrupted their search, leading, despite the decline in employment, to a decline in the number of unemployed persons as defined by the International Labor Office, which dropped to 7.1% in 2020q2 (Figure 4). This effect largely faded away in the third quarter of 2020, where the unemployment rate raised sharply up to 8.9%. But this increase was short-lived. The unemployment rate fell to 7.8 in the fourth quarter of 2020 and then remained stable at this level until the end of 2021. The unemployment rate of young people increased more than that of other age group in the beginning of the pandemic. However, this increase was also short-lived. The youth unemployment rate dropped sharply from the third quarter of 2020 and is slightly lower than its pre-crisis level at the end of 2021.
- Travel between the home and the place of exercise of the professional activity, when they are essential for the exercise of activities which cannot be organized in the form of telework or professional displacements which cannot be deferred; Travel to make purchases of supplies necessary for professional activity and purchases of basic necessities in establishments whose activities remain authorized; Consultations and care that cannot be provided remotely and that cannot be deferred; Care of patients with long-term conditions; Travel for compelling family reasons, for assistance to vulnerable people or childcare; Brief trips, within the limit of one hour daily and within a maximum radius of one kilometer around the home, linked either to the individual physical activity of the people, to the exclusion of any collective sporting activity and any proximity to other people, either walking with the only people in the same home, or the needs of pets; Judicial or administrative summons; Participation in missions of general interest at the request of the administrative authority.
France has combined a strict containment policy with a large spectrum of measures to sustain households, firms and independent workers. Over the years 2020 and 2021 the amount of direct aid to companies is 40 billion euros and the expenditure for partial unemployment amounts to 36 billion (3% of GDP) accompanied by the creation of a 300 billion euros budget to guarantee bank cash lines to firms. These measures have been quite effective at dampening the impact of the lockdown on employment, income of households and firms. France appears to be in the median position among the major European countries (Germany, Italy, Spain, United Kingdom) in terms of mobilizing emergency measures in 2020 (France Stratégie, 2021). Short-time work expenditure, which amount to 1.1% of GDP, France is close to that of Spain and Italy, but below the United Kingdom (2.5%) and above Germany (0.6%). Concerning the other subsidies (corresponding to the Solidarity Fund), with 0.7% of GDP, France appears close to Germany, slightly above Spain and Italy, but well below the United Kingdom (1.5%). Finally, regarding guaranteed loans, France, with 5.5% of GDP, is above the United Kingdom (3.2%) and Germany (1.3%), but below Italy (8%) and Spain (7.2%). France stands out mainly on three points (France Stratégie, 2021): the interest rate of the State-Guaranteed Loans for the first year is the lowest of the countries studied; in terms of short-time work compensation, the cap of 4,600 euros a month per worker for the allocation paid to companies appears to be the highest of the countries studied; access to the Solidarity Fund, initially highly restrictive (in terms of scope and amount) was made considerably easier in the second wave.
For workers, these measures include income support to sick workers and their families, to quarantined who cannot work from home, to persons losing their jobs or self-employment income and help for insecure workers to stay in their home. Unemployed people continue receiving their benefits during the lockdown and the confinement period postpones the exhaustion date of unemployment benefits. Temporary agency workers are paid for the entire duration of their assignment as initially foreseen even if they cannot work because of the confinement measures. People who quit a job for another one but could not be hired are granted exceptional access to unemployment benefits. The seasonal suspension of evictions from dwellings (evictions are forbidden form November 1 to March 31 in normal time) has been extended. The government has requisitioned hotel rooms for homeless people to be used for confinement. The emergency housing spaces that are made available during the winter period are made available all year long.
For firms, measures include deferral of payment deadlines for social and tax payments; possibility of tax rebates for firms facing very important difficulties in the framework of an individual examination of requests; deferral of the payment of rents, water, gas and electricity bills for the smallest businesses in difficulty; aid of up to 1,500 euros for very small businesses (turnover < €1M), self-employed workers and micro entrepreneurs experiencing a very sharp drop in turnover (70% loss compared with the same month in previous year) or subject to administrative closure; creation of a 300 billion euros budget to guarantee the bank cash lines that companies may need because of the epidemic; support from the state and the Banque de France (credit mediation) to negotiate rescheduling of bank credits; simplified and reinforced short-time work programs; support for the treatment of a conflict with customers or suppliers by the Business Mediator; recognition by the public authorities of the Coronavirus as a case of force majeure for their public contracts which implies that for all state and local public contracts, the delay penalties are not applied. Youth
In July 2020, the government launched a “youth plan” which has two main components:
1/ Hiring subsidies: (i) All firms get hiring subsidies equal to 4,000 euros for any young person below 26, recruited between August 2020 and January 2021; (ii) An exceptional grant of 5,000 euros to recruit a work-study student under 18 years of age (under an apprenticeship or professionalization contract) or 8,000 euros to recruit a work-study student over 18 years of age.
2/ Funding of more than 400,000 seats in various training programs for low-skilled youth.
The set of new measures implemented to support small firms and self-employed described above has been quite effective at mitigating the impact of the epidemic on firms. As for corporate failures, contrary to what many feared, the Bank of France indicates that they have fallen by 28.1% over a sliding one-year period. Admittedly, this drop is partly due to the impact of containment on the functioning of commercial jurisdictions and regulatory changes that temporarily modify the dates for declaring insolvencies. But it is also the result of record rates of access to credit by companies in connection with obtaining loans guaranteed by the State.
Overall, these interventions have greatly cushioned the impact of the health crisis on businesses. Indeed, the business failure rate has reached a historically low level which will persist throughout the 2020-2021 period (Figure 5).
Unemployment insurance was effective at providing income to unemployed workers insofar as unemployed people continue receiving their benefits during the lockdown and the confinement period postpones the exhaustion date of unemployment benefits. However, short-time work was the main scheme used to counteract the impact of the strict containment policy. In France, employment protection regulations require dismissal notices of several months and complex and costly procedures for most workers. Many firms whose activity has been very significantly slowed down by the lockdown would not have had enough liquidity to face these constraints and should have been liquidated in the absence of help. In this context, short-time work was the main program chosen by the government to sustain firms and to allow workers to keep their jobs. Since March 1, 2020, short-time work schemes have been extended until December 31, 2020, to certain categories of employees who were previously excluded, under specific conditions (employees whose working hours are atypical, childminders and home workers, employees of public employers carrying out an industrial and commercial activity mainly, vulnerable people and parents of children under the age of 16 unable to work, etc.). The authorization to use partial activity has been granted for a maximum duration of 12 months (compared to 6 months previously) and cannot exceed 1,607 hours per year per employee until December 31, 2020 (against 1000 hours ago). Administrative procedures have been simplified. In particular, the authorization to use short-time work is considered granted within 48 hours after the filing of the request in the absence of a response from the administration (this period was 15 days previously).
The net replacement ratio has been increased to 100% at the minimum wage and 84% for higher wages up to a maximum of 4.5 times the minimum wage, which covers more that 95% of wage earners. The cost of short-time work is borne by the administration. The short-time work allowances are paid by employers who are reimbursed within an average delay of 12 days. according to the agency in charge of reimbursements of short-time work allowances. Until June 1, there was no residual cost to the company unless it was covered by collective agreements which impose higher replacement income than those provided by law, which is scarce. Since June 1, 10% of the short-time work allowances are paid by employers except in sectors most affected by the crisis (i.e. tourism, hotels and restaurants, sports, culture, air transport, events) and those dependent on them.
In addition, the law of June 17, 2020 introduced a specific regime for long-term short-time work, aimed at providing long-term support, up to 24 months, to companies whose activity will be permanently reduced. Entry into the scheme is subject either to the conclusion of a company-wide agreement or to the drawing up of a document by the employer in accordance with a branch agreement. This agreement or document will then have to be approved by the administration.
The government also announced that collective dismissals are subjected to increased scrutiny before getting the authorization from the administration during the containment periods. Accordingly, the number of collective layoffs dropped dramatically: it is about three times lower in March-April 2020 than in March-April 2019.
After the summer of 2020, the very generous short-time work scheme was limited to establishments open to the public subject to total or partial administrative closure, or located in a territory subject to specific restrictions (curfew, gauges in establishments open to the public, etc.) and suffering a drop in turnover of at least 60%; or in establishments falling within specific sectors (such as those of tourism, hotels, restaurants, sports, culture, air transport and events) which have suffered a sharp drop in turnover of at least 65%.
Hence, at the start of the coronavirus crisis, the use of short-time work has experienced exceptional growth. In the beginning of May 2020, about 50% of employees have required short-time work, with on average 420 hours of unoccupied hours requested per employee (12 weeks of 35 hours per week) (Figure 2). The number of employees in short-time work fell sharply after May and June and increased again in the second lockdown which started on October 29, 2020. Eventually, after the relaxation of the most restrictive restrictions in May 2021, partial unemployment gradually decreased to reach a plateau between 400 and 500 thousand people from autumn 2021.
The share of employees working from home increased strongly in the second quarter of 2020 (Figure 5). This share then decreased drastically after this period and increased again in the second lockdown. Overall there is an increasing trend in the share of employees working from home over the years 2020-2021 (OECD 2021).
During April 2020, about a quarter of employees were teleworking all the week (Dares 2020a). Telework is particularly frequent in the information and communication sectors (63% of employees), and financial and insurance activities (55%), in which it was already much more widespread before the crisis. It is less so in accommodation and catering (6% of employees), construction (12%), the food industry (12%) and transport (13%).
To support the expansion of teleworking, the social partners have signed an interprofessional agreement which specifies in particular the conditions under which employers and employees can refuse teleworking, the payment of the costs of teleworking and the right of employees to disconnect. This agreement, extended by the Ministry of Labor, applies to all companies.
A large share of firms had to implement protective measures for their employees, which likely reduce labor productivity. Companies that have set up protective distances for most of their employees working on site represent 69% of employment. Distance measures for on-site workers are more often implemented in industry and transport and less often in accommodation and food services (28%), other service activities (45%) and construction (46 %).
When asked why they did not put in place certain preventive measures companies most often replied that this was not necessary, given the organization of work (43% of employees), or that they did not have the necessary equipment (43%) (DARES, 2020a). 22% replied that this was not possible given the organization of work.
On 25 March 2020, the government passed an ordinance which modified the regulation of holidays and working time until 31 December 2020.
Vacations and working time
Concerning holidays, this ordinance stipulates that during the health emergency period and subject to a company or industry agreement, the employer may exceptionally impose the taking of paid holidays, within the limit of 6 working days, respecting a notice of at least one day (instead of 1 month or the period provided for by a collective agreement). Without a company or industry agreement, the employer can require the employee, with a minimum notice of one day, to take or modify working time reduction days (RTT) and the days available on the time savings account within the limit of 10 days.
Concerning working time, companies belonging to sectors “particularly necessary for the security of the Nation or for the continuity of economic life” (the list of which is determined by a decree), may derogate from the regulation of hours of work (in particular, shift from 10h to 12h for the maximum duration of day work; shift from 8h to 12h for the maximum duration of night work; shift from 44h to 46h for the authorized weekly working time over a period of twelve consecutive weeks; shift from 48h to 60h for the authorized working time in the same week; work authorization on Sundays).
The conjunction of the economic activity slowdown and of the large short-time work program which dramatically dampens the reallocation of jobs makes the situation of new labor market entrants particularly difficult. In order to counteract expected drops in the demand for apprentices and in recruitment of youths, the government launched in July 2020, a “youth plan” which has two main components: 1/ Hiring subsidies. (i) All firms get hiring subsidies equal to 4,000 euros for any young person recruited between August 2020 and January 2021. (ii) An exceptional grant of 5,000 euros to recruit a work-study student under 18 years of age (under an apprenticeship or professionalization contract) or 8,000 euros to recruit a work-study student over 18 years of age. 2/ Funding of more than 400,000 seats in various training programs for low-skilled youth.
These generous aids, combined with an apprenticeship reform introduced in 2018, have contributed to increasing the number of apprentices, which increased by 32% between 2019 and 2020.
The government reported important reforms about the pension system and about unemployment insurance. The unemployment insurance reform has been progressively implemented between September and November 2021. This reform increased from 4 to 6 months the duration of work necessary to be eligible for unemployment compensation, introduced a declining unemployment compensation according to the duration of unemployment for salaries above 3500 euros and modified the calculation of the salary taken into account to determine the amount of unemployment benefit. The pension reform is still postponed and might be implemented after the presidential election, in April 2022, depending on the elected candidate.
Beside the expansion of short-time work in the start of the crisis, the government has created a long-term short-time work scheme (Activité partielle de longue durée, Decree, 28 July 2020) designed to provide security for employees and business activity, which enables companies faced with a lasting reduction in activity to reduce working hours in return for commitments, particularly in terms of job maintenance. The long-term short-time work scheme can be mobilized by all companies – faced with a lasting reduction in activity – established on the national territory, without any size or sector of activity criteria. It requires a collective agreement, signed within the establishment, the company, the group, or the industry. In the latter case, the employer draws up a document that complies with the stipulations of the industry agreement. The reduction in an employee’s working hours may not exceed 40% of the legal working hours per employee, over the total duration of the agreement, which may be set up within the limit of 24 months, consecutive or not, over a period of 36 consecutive months. The employee receives an hourly indemnity for hours non-worked, paid by his employer, corresponding to 70% of his gross salary, up to a limit of 4.5 times the minimum wage. The employer receives an allowance equivalent to 60% of the gross hourly wage limited to 4.5 times the minimum wage. This scheme is quite successful: by the end of 2021, it covers about 200,000 workers and accounts for about 50% of all workers on short-time work (Figure 7).
Moreover, in order to ensure a sustainable recovery of the French economy, the government has implemented an exceptional €100 billion recovery plan based on three main components: ecology, competitiveness and social cohesion. The French stimulus plan weighs 100 billion euros, making it the largest stimulus plan in Europe as a percentage of GDP, weighing in at 9.5%, compared with 6.9% in Germany and 8.6% in the United Kingdom. It weighs about a third of the French government’s annual budget the previous year. Of the 100 billion announced, 40% comes from the 2020 European recovery plan, which will be reimbursable until 2058. The plan is intended to be structural, in order to “prepare France for 2030”, and not just cyclical.
The current period is marked by a very high degree of uncertainty linked to the resurgence of new waves of the epidemic, even if vaccination is widespread. The situation of public finances deteriorated considerably during the crisis. The public deficit reached 9% of GDP in 2020 and 7% in 2021, while public debt fell from 98% to 120% of GDP between 2019 and 2021. The public deficit made it possible to limit the impact of the health crisis in 2020 and favored the strong rebound in activity in 2021. However, this budgetary trajectory, which is clearly unsustainable (Cour des comptes, 2021), will require adjustments in the future that might be difficult to implement.