Hollande's salvation may lie in France's demography

For French president Francois Hollande, unemployment has been a plague. Since the socialist leader was elected three years ago, it has crept up and settled above 10 per cent of the labour force, a level not seen since the mid-1990s. A record 3.5m people are now out of work in the eurozone's second-largest economy, including nearly a quarter of those aged 25 and under.

The government has responded with a campaign to simplify France's rigid labour code and loosen up some of the regulatory burdens that hold back smaller companies from hiring. Yet the statistics show little improvement.

For Mr Hollande, whose approval ratings have been mired at historic lows, his political career is on the line: He has vowed not to run for president a second time if unemployment does not decrease by the end of his five-year term in 2017.

Yet what if the French president could sit back and count on powerful demographic forces to save him? That is one conclusion to be drawn from a study published last week by France Strategie, a government-affiliated think-tank.

The study - which was conveniently released the day after the government announced a rise in jobseekers for March - predicts that on average, 619,000 jobs will be freed up each year by French workers going into retirement.

This is potentially huge: Retiring baby boomers, born in the three decades of prosperity that followed the second world war, are expected to account for roughly 80 per cent of all jobs up for grab between now and 2022. That is up from 411,000 a year in the mid-1990s, and up from 565,000 during the presidency of Nicolas Sarkozy, who was defeated by Mr Hollande in 2012.

TheFrance Strategie economists have sought to measure the impact on the job market depending on different economic scenarios. In what they consider the most likely, which factors in a 1.4 per cent annual growth rate, unemployment is set to slide below 8 per cent in 2022. Even under the worst-case scenario, which is based on an average 1.1 per cent annual GDP growth, unemployment is set to decrease to 9.7 per cent by then.

While the trend of retiring workers may be common across the continent, France stands out because - unlike Germany and nations - it boasts one of western Europe's highest birth rates, at 2.01 children born per woman. That should boost its growth potential over the long term, and therefore its ability to create jobs. By contrast, Germany is expected to lose about 740,000 jobs by 2025 because of a declining population, according to Cedefop, an EU labour agency.

The danger posed by the demography, say economists, is that France may tone down or abandon altogether politically-sensitive attempts to bring more flexibility into the job market.

"The message is not that we don't need reforms. We do. Those levels of unemployment are nowhere near satisfying," said Jean Pisani-Ferry, the well-regarded economist who led the study.

Labour Minister Francois Rebsamen, whose labour market bill is to be voted in Parliament by the summer, was quick to rebuff any temptation to slowdown the pace of reforms. "We also need to make sure those jobs are filled," he said last week, noting that there was a problem with skills in the workforce.

Many of the posts being vacated by retirees are not the high-skilled, high-wage jobs of the knowledge economy that politicians like to tout. The single-largest category affected by retirements will be cleaners, of which France will need 350,000 news ones before 2022.

Still, the demographic trends identified by the report suggest that - contrary to the sour public mood - the winds are not all running against France. Mr Hollande's effort to rejuvenate the economy has also received an unexpected boost of late from a weak euro, cheaper energy prices and record low interest rates.

Ageing baby boomers may not be enough to bring back France into full employment soon. But they may be one of the reasons why Mr Hollande - for all of the nation's ills - seems so confident he will run again for president in two years.

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