IMF Survey: France's 35-Hour Week: Benefit or Straitjacket?

The intention was to create more jobs at a time of high unemployment

The 35-hour workweek reduced overall employment for affected workers

French workers did not become happier after their workweek was reduced

Since the 1950s, the number of hours worked has been declining in Europe when compared with the United States and Japan.

employment

Today, the average American works about 400 hours more a year than the average European, although there are significant differences within Europe itself. Different suggestions have been put forward to explain this trend, ranging from tight labor market regulations and strong labor unions to a stronger preference for leisure in Europe.

In France, part of the declining trend in the average number of hours worked is due to laws that limit work time. In 1998, a new law forced companies with more than 20 employees to institute a 35-hour workweek by 2000. Smaller companies with fewer than 20 employees were given until 2002 to implement the measure.

The intention of the law was to create more jobs at a time of high unemployment. But how has it worked in practice? An IMF working paper sheds new light on the French approach to job creation.

Comparing large and small firms

The only way to correctly evaluate the empirical effect of the reduced workweek on employment and welfare is by isolating its effects from myriad political, economic, and social changes that were taking place when the law was enacted. The IMF study asked if the law has succeeded in creating more jobs and if the French were enjoying the extra time off.

The working paper studied the law's effect by comparing the behavior of workers in large and small firms before and after the new rules went into effect. The approach was similar to that of medical experiments: the treatment (the 35-hour workweek) was administered to one group (large firms) and not to another (small firms). By comparing these two groups, the study was able to evaluate the effect of the treatment. It found that the law had a number of unfortunate and unintended consequences:

• The 35-hour workweek reduced rather than increased overall employment for workers directly affected by the law.

• It encouraged workers in large firms to look for second jobs and move to small firms, where the law was implemented later.

• Hourly wages increased in large firms compared with small firms. This increase may reflect large firms' need to compensate their employees for working fewer hours.

• There was an increase in the hiring of unemployed workers in large firms when compared with small firms after the law was enacted. This increased job turnover could be the consequence of large companies trying to keep their labor costs down.

• Employment growth in large and small firms in 2000 was running at a similar pace, which suggests that the law did not raise overall employment.

• Finally, French workers did not become happier after their workweek was reduced. Surveys measuring satisfaction and quality of life do not suggest French workers became more satisfied than their counterparts elsewhere in Europe after the enactment of the law.

In sum, the 35-hour workweek appears to have had a mainly negative impact. It failed to create more jobs and generated a significant—and mostly negative—reaction both from companies and workers as they tried to neutralize the law's effect on hours of work and monthly wages. While it cannot be ruled out that individuals who did not change their behavior because of the law became more satisfied with their work hours, simple survey measures do not show increased satisfaction.