IIRC, the compensation for firing someone is 0.25 months of salary per worked year (first ten years, after that it's 0.33 months). It's not that much, and if he has enough work to take on extra staff he probably could put away that money in the case of a firing. If the company is going down because of end-of-contract compensations, the company would be going down anyways. Also, temporary contracts exist if he just wants extra help during specific times, and those do not have any compensation at the end of the contract.

In other words, the compensation for end-of-contract is just 2% of the salary of the worker per month. If the benefits of having a worker is more than 2% of their salary, it's worth it.

But to avoid deviating from the topic: the gig economy is not about small family businesses. Gig economy is a buzzword used by companies that could pay decent salaries and worker protections but are too dominated by greed to do it.

You neglect the cost of lawyers when he’s sued and the cost of spending time talking with his lawyer about something that won’t make any money while he’s being sued. I presume French businesspeople aren’t fools and their extreme reluctance to hire is rational. If you see total idiocy everywhere sometimes you’re right but mostly there’s something you don’t know that explains the behaviour.

  I presume French businesspeople aren’t fools and
  their extreme reluctance to hire is rational.

Well, hiring your first employee is a special case.

You gotta learn what legislation applies to you now and start following it. Gotta pay people regularly, instead of when it's convenient for you. Gotta have policies for things like expenses and sick leave and holiday and car use and overtime and bribery and dress code. Gotta apply the policies consistently and fairly. Gotta get them work space and equipment and maybe parking. Maybe you need to provide training. Gotta to figure out how to put job ads into the newspaper or whatever your industry is doing these days. Gotta decide what sort of interview questions you're going to ask...

The cost of lawyers he's sued is the same no matter the legislation. I assume that different laws give different ways to sue, but I don't think that cost depends that much on the cost of firing someone. If the employer does everything according to the norm (e.g., if the workload diminishes and he cannot take on the employee anymore, he needs to have the numbers that prove that) nothing should go badly.

Isn't that complaint, valid as it is, a separate issue? Also it's rather localized, to France (and possibly a few other countries).

I can be fired with one month warning, and I have the same one month notice if I want to quit. That seems fair for both parties.