France: Job creation will remain the main objective

The COVID crisis is going to wipe out many jobs in sectors hit hard by the crisis. France’s primary economic policy objective will therefore have to be to create jobs. But this was already the case before the crisis, given France’s abnormally low employment rate. Policies that boost employment during the crisis will therefore remain useful after the crisis. It is worth remembering that a comparison between OECD countries shows that the employment rate is: Negatively correlated with the weight of corporate social contributions, which are themselves positively correlated with the size of redistributive policies; But not correlated with the weight of tax on capital income or the corporate tax burden; Positively correlated with labour force skills; Negatively correlated with the extent of income inequality before redistribution, which shows that increasing the employment rate reduces this inequality and sets in motion a virtuous circle where declining inequality makes it possible to reduce the size of redistributive policies and the tax burden. This illustrates the need for France to lift its employment rate both during and after the crisis, which can be done by lowering labour costs and raising skills.