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Founded in Geneva in 1996 under the auspices of the Council of Europe, FEDRE has always focused on cross-border regions. In 2023, it formed a partnership with Crédit Agricole next bank to study the border effect along Switzerland’s periphery in various fields, some of which go unnoticed by the general public. Following Issue 1, which addressed food aid; Issue 2, which examined challenges in the healthcare sector; Issue 3, which explored a vital issue for our regions—water; and Issue 4, which focused on culture, we now turn to the sensitive topic of unemployment: who provides compensation to cross-border workers who have lost their jobs?
In cross-border relations between Switzerland and its neighboring regions, there are a number of ticking time bombs: healthcare is one (see our NewsletterNo. 2), housing is certainly another, and now there is the question of who pays for cross-border workers’ unemployment benefits. This issue appears to be gaining momentum in France.
There are European regulations on this matter
As surprising as it may seem, there are no European rules governing the direct taxation of cross-border workers: the issue is settled solely by bilateral agreements, which are far from uniform. For example, Geneva, which collects taxes at the place of work and transfers a portion to the regions where cross-border workers reside, has a system that is the opposite of that of the eight other cantons bordering France, where Paris collects taxes at the place of residence and transfers a portion to those cantons.
But the situation is quite different in the area of social insurance, particularly unemployment insurance, since Regulation 883—supplemented in 2009 by Regulation 987—has been in effect within the EU since 2004, stipulating that the state where the cross-border worker resides is responsible for paying benefits. One might argue that Switzerland, not being an EU member, is not affected. Well, it is! Under the Agreement on the Free Movement of Persons between Switzerland and the EU, which entered into force in 2002 and extended this provision to Switzerland as of April 2012. However, it is now clear that this creates a number of imbalances, particularly with France.
Growing concern on the French side
The French government has recently expressed concern over the state of public finances. Among other cost-cutting measures, Prime Minister Gabriel Attal announced on March 26, 2024, his intention to restrict unemployment insurance benefits. It was against this backdrop that Xavier Roseren, a Macronist MP from Haute-Savoie, questioned Labor Minister Catherine Vautrin in the National Assembly during its April 3 session regarding the costs of unemployment among cross-border workers, which have nearly doubled since 2010, rising to over €900 million per year. And Switzerland accounts for 70% of this total (over 600 million), even though it hosts only 43% of all French cross-border workers. All of this is therefore placing an increasingly heavy burden on the state budget, while—let us not forget—these unemployed individuals have paid their contributions… in Switzerland.
That is why France now wants the EU to amend the 2004 European Regulation.
Looking to get back on track?
In fact, France made an initial attempt a few weeks ago to amend EU Regulation 883/04. It submitted its proposal to the Council of the European Union, but Belgium—which holds the presidency of the Council during the first half of 2024—did not support it. However, it appears that France plans to draft a new reform proposal after the European elections in June, when Hungary takes over from Belgium in the second half of the year. It is difficult to say what the chances of success are. At first glance, the issue of cross-border workers is not a sensitive one for Hungary, but on the other hand, relations between Emmanuel Macron and Viktor Orbán are particularly strained. So, the outcome remains to be seen. And Switzerland?… As it is not a member of the EU, it is unlikely to have a say in the discussion.
What factors might explain, in the case of France, the increasingly heavy cost of unemployment among Swiss cross-border workers? Obviously, the rapid increase in the number of these workers over the past twenty years, accelerated by the agreement on the free movement of persons between Switzerland and the EU. Another factor is the very high level of Swiss wages (2.5 to 3 times French wages), which are used to calculate the benefits (generally 57% of the reference daily wage) paid by UNEDIC. Added to this is the duration of benefits, which is usually 18 months and extends up to 27 months for those over 55. Let’s add another factor specific to the behavior of cross-border workers: according to the Maison de l’Emploi et de la Formation in Mulhouse, a number of them are reluctant to quickly return to work in France for €2,000, preferring to collect their benefits—which often amount to double that amount—for as long as possible. Furthermore, taking advantage of the fact that to qualify for unemployment benefits in France, one need only demonstrate six months of employment over the past two years, we must account for those—especially young people—who work in Switzerland for short periods at a good salary, then return to unemployment, and so on…
Furthermore, the cantons bordering France—with the exception of Bern, Solothurn, and Basel-Landschaft— all above the Swiss average of 2.4% of registered unemployed (official SECO figures for March 2024), with peaks in Geneva (4.3%), which holds the record, followed by Jura and Basel-City (3.8%), and then Vaud (3.7%). In any case, neither Germany, Austria, nor Italy seems to have the same problem with their cross-border unemployed workers from Switzerland. It must be said that in Italy, unemployment benefits are capped at €1,550! But the Ticino trade union OCST says it is concerned about the resulting loss of income for cross-border workers. It also believes that this may encourage some employers to pressure their cross-border workers by threatening to fire them to make them accept certain conditions.