France: And yet we know what needs to be done

The debate on economic policies in France has become extremely confusing: there is a demand for more public services and lower taxes; for increased wages, even though they have increased faster than productivity and France has a cost competitiveness problem; for a reduction in inequalit y whereas it is stable and low compared with other OECD countries and the scale of the redistributive policies is very substantial. And yet we know more or less what needs to be done in France: Restoring the employment rate, whose low level increases inequality (before redistributive policies), and reduces potential production and tax revenues. The employment rate is mainly linked to the weight of companies’ social contributions and labour force skills; Continuing and amplify ing policies aimed at improving skills (education, vocational training); Reducing the weight of companies’ social contributions. Public spending in France is higher than in the other euro-zone countries mainly as regards pensions, support to companies and the payroll in the public sector, where labour productivity is 13% lower than in the rest of the euro zone. To fi nance the reduction in companies’ social contributions, one must therefore: Increase the retirement age; reduce support to companies and increase labour productivity in the public sector (overall hiring ban, digitalisation, etc.).