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France may scrap high jobless pay of up to 7,700 euros per month

PARIS (Reuters) - France wants to trim back jobless benefits that can reach 7,700 euros (6,631 pounds) per month for those who lose high-paying positions as part of an overhaul of unemployment insurance, the prime minister said on Tuesday.

FILE PHOTO: French Prime Minister Edouard Philippe speaks to the media during a national gathering to protest antisemitism and the rise of anti-Semitic attacks in the Place de la Republique in Paris, France, February 19, 2019. REUTERS/Gonzalo Fuentes/File Photo - RC19EDCF1610

President Emmanuel Macron’s pro-business government will also look at ways of discouraging firms from relying heavily on short-term labour contracts, Edouard Philippe added.

Unemployment insurance is the next big hurdle on Macron’s reform agenda after he eased labour laws in 2017 and scrapped France’s wealth tax in a move intended to boost investment.

Currently, the government has little control over how much and for how long the unemployed receive benefits, which are negotiated on a national level by unions and employers every two to three years.

After unions and employers failed this month to thrash out an overhaul, the government said it would come up with its own reform outline.

“We need to revise our system which allows benefits levels for high salaries that are three times more than what goes on in our neighbours,” Philippe told journalists.

Unemployment benefits in France constitute on average 68 percent of a worker’s previous wages, compared with 56 percent in other nations of the Organisation for Economic Cooperation and Development (OECD) group of 36 advanced economies.

However, unlike France, in most other countries benefits fall the higher a worker’s previous salary was.

Though the maximum jobless payout can reach 7,700 euros, the average is closer to 1,200 euros and only about 0.03 percent of people on benefits get the highest amount, according to the Unedic jobless benefits fund.

The reform aims to save up to 3.9 billion euros over three years and will be presented in the coming months so that it can become effective mid-year, Philippe said.

He added that the government would also look at setting up a scheme of incentives and disincentives to discourage employers from putting workers on short term contracts.

Traditionally, French employers have used them to avoid permanent labour contracts, under which it is much harder to get rid of workers.

In France, Unedic is financed by contributions from workers and employers, with shortfalls made up by borrowing on capital markets.

Because Unedic benefits from a state guarantee, its debt counts towards France’s total government debt, which stands at close to 100 percent of GDP.

($1 = 0.8800 euros)

Reporting by Jean-Baptiste Vey and Caroline Pailliez; Writing by Leigh Thomas; Editing by Andrew Cawthorne