France's move to a 35-hour workweek preserved employment overall with help from payroll tax cuts, but the benefits differed sharply between managers and lower-skilled workers, according to research involving a Cornell University economist.
The analysis found employment rose among managers and professionals while falling among lower-skilled workers. Cornell reported that the policy also reduced total working hours, prompted changes in how firms organized work and increased pressure on employees to produce nearly as much in less time.
Elio Nimier-David, an assistant professor of economics in Cornell's ILR School, co-authored the National Bureau of Economic Research working paper. The team spent nearly five years examining a reform that remains a subject of political debate in France.
How the reform worked
The 1998 measure reduced France's statutory workweek from 39 hours to 35 without cutting workers' pay. Firms adopting the shorter schedule could receive employer payroll tax reductions of up to 11%.
Businesses with more than 20 employees faced a January 2000 implementation deadline. Smaller firms had until January 2002. That staggered rollout gave the researchers a way to compare employers affected at different times, using administrative records and survey data.
The distinction matters because national workweek mandates usually make it difficult to compare affected and unaffected workers. Here, the different deadlines helped the team separate the reform's effects from other economic changes.
Managers and skilled employees experienced the work-sharing gains the policy sought: Their hours declined while employment in those groups increased. Some employers provided the reduction through longer holidays rather than a uniform change to each workday.
Lower-skilled workers experienced a different outcome. Reorganization and efforts to raise output per hour reduced employment in that group and encouraged a shift toward part-time work, Nimier-David said. Shorter schedules also spread to some employees who already worked fewer than 39 hours.
Tax cuts offset employment losses
The Cornell account estimates that the shorter workweek alone would have reduced employment by 3.8%. The accompanying payroll tax cuts largely offset that decline, leaving overall employment broadly unchanged. That makes the combined package different from an hours reduction without employer subsidies.
Across the economy, total hours worked fell 6%, while production declined about 1%. The researchers also estimated a 2% increase in total factor productivity, a measure of how efficiently labor and other inputs produce output.
They attributed the productivity gains partly to reorganized tasks and tools and partly to greater work intensity. Employees had less time to deliver nearly the same output, and survey evidence pointed to additional stress.
The working paper studies a specific French policy combining shorter hours, unchanged pay and tax incentives. Its findings are not an estimate of what an identical hours reduction would do in New York or under a different subsidy system.
The other authors are Pauline Carry of Princeton University, Claire Montialoux of Sciences Po, Alexandra Roulet of INSEAD and Nina Roussille of the Massachusetts Institute of Technology. Their results show why the overall employment figure alone does not capture who gained and who lost under the reform.
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