The failure of France's 35 hour week

Not only were the employment effects of reducing the standard workweek to 35 hours "not significant", the policy has also made French workers less satisfied with their jobs. Those are the somewhat surprising claims of a new paper by Marcello M. Estevão from the IMF and Filipa Sá from MIT, to be given next month at the IZA European Summer School in Labor Economics.

Their paper, Are the French Happy with the 35-Hours Workweek? (PDF), doesn't pull many punches and is bound to cause controversy in France. Here's the abstract:

Aiming at lowering unemployment, the French government mandated the reduction of the standard workweek from 39 to 35 hours in 1998 to be implemented in large firms by 2000 and in small firms by 2002. The difference in timing by firm size is used to set up a quasi-experimental design to analyze the effect of the law on workers’ welfare. The law may have worked as a coordination mechanism to improve welfare in the presence of strong positive complementarities in leisure among individuals, or it may have introduced distortions and made workers worse off. Estimates from the French Labor Force Survey for the years 1993 to 2000 suggest that the law did not make workers happier.

The 35-hours mandate increased the proportion of dual-job holdings and the transitions from large to small firms, which may have been motivated by the desire to work more hours. Estimates using data on subjective satisfaction with hours of work from the Eurobarometer suggest that those who were affected by the law became less satisfied with their hours of work.

The law also increased wages in large firms relative to small firms to compensate workers for the reduction in hours and keep the same monthly income. As a result, large firms replaced some workers with cheaper unemployed individuals. The net employment effect is harder to quantify, but the estimates suggest it was not significant.

Comments

[Jim Neuhaus]

I suggest to anyone who thinks that this measure had no effect on unemployment to read the INSEE report "Les effets de la RTT sur l'emploi : des simulations ex ante aux évaluations ex-post".
http://www.insee.fr/fr/ffc/docs_ffc/es376377b.pdf
(in French, for some reason ;-)

In addition, the reform was halted and reversed in many companies since 2002, so it would be a little unfair to judge a measure whose was first experimented in 1998 and extended in 2000 on such a short duration.
Despite that, some positive effects on employment could be observed (around 400000 jobs created net).
The (somewhat new) government has also mounted a heavy campaign against RTT with measures that made it less and less attractive to workers, which may explain why some people are unhappy.
Yet, unhappiness is not a good measure of success for an unemployment-targeted measure as it may decrease the happiness of those employed before to increase that of those employed after.
JN

[Matt Canavan]

Although I am sceptical whether the 35 hour week would create more jobs (especially in the long term), the paper doesn't completely refute the other possible benefit that restricting work might make us all better off because it diminshes opportunities to compete on wasteful status goods. Importantly, people wanting to work more is not a refution of this theory. You may want to work more, but if everyone did it then noone would be better off because noone has really got ahead.

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