Insiders, Outsiders and French Unemployment

Why France has had persistently high unemployment, especially for youth, how strong protections for permanent workers create a dual labour market, and Macron's reforms.

France has had persistently high unemployment, around 7 to 10 percent for decades.

Youth

Youth unemployment has often exceeded 20 percent.

Dual labour market

Insiders: workers on permanent contracts (CDI) with strong job protection.
Outsiders: young people and others on short-term contracts (CDD) or unemployed.
Firms hesitate to offer permanent contracts because firing is costly and uncertain.

Effects

Young workers cycle through temporary jobs.
Inequality between protected and unprotected workers.

Macron’s reforms

2017: labour code reforms capped severance payments for unfair dismissal and let firms negotiate more locally.
Unemployment insurance tightened.
Apprenticeships expanded sharply.

Results

Unemployment fell to around 7 percent, its lowest in years, by 2023, and apprenticeships reached record numbers.

Economic theory

Economists Assar Lindbeck and Dennis Snower developed the insider-outsider theory.

The temporary contracts

A 26-year-old graduate in Lyon has worked five short contracts in three years, unable to get a permanent job with a bank loan and stability.

Thinking strong job protection helps all workers

It can leave outsiders in temporary jobs.

Key takeaways

France has had high unemployment for decades.
Strong protection for insiders creates a dual market.
Macron's 2017 reforms capped severance.
Unemployment fell to about 7 percent by 2023.