France's 35-hour week reform: employment fell among lower-skilled workers, rose among managers

A working paper published on Oct. 15 by the National Bureau of Economic Research analyzes the 1998 French reform that shortened the statutory workweek from 39 to 35 hours without a reduction in pay, according to miragenews.com. miragenews.commiragenews.commiragenews.comOpen source ↗ The authors found that employment overall was unchanged, but there were several large, offsetting effects. Employment among managers and professionals increased, while lower-skilled workers saw a significant decrease. miragenews.commiragenews.commiragenews.comOpen source ↗

The paper is titled "The Effects of a Shorter Workweek on Employment, Output, and Productivity". Its authors are Elio Nimier-David (assistant professor of economics in the ILR School), Pauline Carry (Princeton University), Claire Montialoux (Sciences-Po Paris), Alexandra Roulet (INSEAD) and Nina Roussille (Massachusetts Institute of Technology). The team spent nearly five years analyzing the mandate. miragenews.commiragenews.commiragenews.comOpen source ↗

Design of the reform and the data

Firms that adopted the reduced hours could claim employer payroll tax cuts of up to 11%. The policy was phased in by firm size: firms with more than 20 employees had to comply by January 2000, smaller firms by January 2002. miragenews.commiragenews.commiragenews.comOpen source ↗

Nimier-David said causal evidence is usually hard to obtain because such mandates are typically national, leaving no group of unaffected workers for comparison. The two-stage rollout and a rich set of administrative and survey data made it easier to separate the effects on workers, firms and the economy. miragenews.commiragenews.commiragenews.comOpen source ↗

Employment, hours and productivity

The central question was whether the 10% reduction in hours led to more workers in the workforce. Among managers and skilled labor, employment increased as planned: weekly hours fell while pay remained the same. Lower-skilled workers saw a net drop in employment, as reorganization and a push to produce more in less time took effect. This also pushed employment toward part-time work, Nimier-David said. miragenews.commiragenews.commiragenews.comOpen source ↗

He described a cascade: workers at 39 hours moved to 35 at the same pay, then those already at 35 asked for the same 10% increase and moved to 33 hours, and those at 33 moved to 31. The result was a broader shift toward shorter hours, particularly among lower-skilled workers. miragenews.commiragenews.commiragenews.comOpen source ↗

The authors find that the shorter workweek alone would have reduced employment by 3.8%, but that decline was largely offset by the payroll tax cuts. In aggregate, total hours worked fell by 6% while production declined by only 1%. The gap reflects a 2% rise in total factor productivity. miragenews.commiragenews.commiragenews.comOpen source ↗

The researchers attribute the gains partly to reorganization and "work intensification", meaning the same output in less time. Some workers reported more pressure and more stress. miragenews.commiragenews.commiragenews.comOpen source ↗