The OECD today urged France to tackle its high unemployment rate by easing labour laws to make it easier for firms to hire and fire, and by lowering the costs of hiring.
In a report on France, the Organisation for Economic Cooperation and Development attributed the country's low use of its labour potential to low labour market participation among young workers and older workers' early exit from the market.
The relatively low number of hours worked, and high structural unemployment also meant France was not getting what it could out of its labour force, the OECD added.
"Improving the labour market situation would not only increase living standards and growth potential but also reduce social exclusion and ease pressures on public spending," the OECD said in the economic survey of France.
To tackle its unemployment rate of 10.2 per cent, the highest in over five years, the OECD recommended France ease its strict laws protecting workers, making it easier for firms to hire and making the labour market more flexible.
"The labour market . . . needs a global reform that should combine easing employment protection legislation with reduction in labour cost for the low paid," the OECD said in the report. France faced a challenge to change the population's attitudes towards the minimum wage.
"Policymakers have difficulty in convincing the public that increases in the real level of the minimum wage are more likely to create unemployment than to increase aggregate demand," the OECD said.
To increase participation in the labour market, France should reduce incentives for people to stop working early. It should also try to make job placement services more efficient to match companies' demand for labour with available workers.
The OECD maintained its forecasts for France's economic growth and public deficit at the levels it saw in its twice-yearly Economic Outlook issued last month. It forecast growth of 1.4 per cent this year and 2.0 per cent in 2006. It saw the public deficit at 3.0 per cent this year and next.