How does a shorter work week translate into higher unemployment?

Because it can lead to a loss of sales/profits, preventing me from keeping people I do employ. That's a worst case scenario of course. More likely, it simply doesn't translate into higher employment figures.

As a silly example, if I have $10 to use to hire someone then I do so. That person works 40 hours/week. If the government suddenly steps in and says that they can only work 35, but I can't reduce their pay, then that doesn't mean I magically hire someone to work the other 5 hours -- there simply isn't money to do so.

Of course, that loss of 5 hours/week may mean that I'm actually less profitable, so maybe I can't even afford that additional employee...

And there are other issues to consider -- even if I could afford to hire more people to make up for the lost hours, what if I don't have the office/floor/whatever space for them? What about purchasing additional tools? What if there simply aren't enough qualified people in that profession in the first place?

And you can't possibly allow companies to pay employees less, even though it's less work. Doing so means that they'll have less cash available to buy things -- at the same time that you're squeezing sellers to raise their prices to hire more people.

If you allow for overtime (pref. paid at an increase, or at least time off in kind) then it pretty much eliminates the problem, but as I understand it (and I could be wrong), French law simply says 35 hours period. It creates an artificial limit on supply and really whacks things out.

I'm not for repealing labor laws regarding a 40 hour work week -- there is such a thing as a fair medium -- but we no longer have closed economies, and imposing limits on employers and employees has side effects.