Presentation of the 2019 OECD Economic Survey of France

2019 OECD ECONOMIC SURVEY OF FRANCE Towards more inclusive growth and employment Paris, 9 April 2019

http://www.oecd.org/eco/surveys/france-economic-snapshot

@OECDeconomy @OCDE

Main themes

France’s assets and reform agenda

Growth is resilient, but insufficient Key long-term challenges Labour market performance and implementation of the OECD Jobs Strategy Efficiency of public investment 2

France’s assets and reform agenda

3

France’s productivity is high GDP per hour worked, level Current USD PPPs, 2017

NOR

BEL

DNK

AUT

DEU

USA

NLD

CHE

SWE

0

FRA

0

FIN

10 ISL

10 EA19

20

GBR

20

AUS

30

ITA

30

ESP

40

OECD

40

CAN

50

JPN

50

SVK

60

NZL

60

CZE

70

PRT

70

GRC

80

POL

80

KOR

90

HUN

90

Source: OECD (2019), OECD Productivity Statistics (database).

4

Health-adjusted life expectancy is high Years, 2016ยน

1. Average number of years that a new-born infant can expect to live in full health.

2. Euro area member countries that are also members of the OECD (17 countries).

Source: WHO (2019), Global Health Observatory data repository , World Health Organisation, Geneva.

5

The ongoing reform agenda is ambitious Potential impact of some ongoing reforms GDP per capita after 10 years (%) GDP per capita

2017-18 labour market reforms - Higher targeted spending on lifelong learning, increased flexibility of employment protection, lower administrative extension of branch-level agreements.

Tax measures - Reduced tax wedge, reduction of capital income taxation, steady increase in in-work benefits.

1.4

Product market and simplification measures

0.4

- Simplification of bankruptcy procedures, smoothing of firm-size related thresholds and incentives for employee-participation schemes.

Total

3.2

1.4

Source : OECD Staff calculations and De Williencourt, C, Faci, A. et S. Ray (2018), « Quel effet macroéconomique du PACTE ? Premiers éléments de réponse », Trésor-Eco, No. 226.

6

Reforms will benefit lower- and middleincome households Illustrative increases in disposable income over the long term By income groups, % 9

9 8

Tax measures Total effects

Product market and simplification measures² 2017-18 labour market reforms

8

7

7

6

6

5

5

4

4

3

3

2

2

1

1

0

0

-1

The poor

Lower middle-class

Mean

Upper middle class

The rich

Source: OECD Staff calculations and De Williencourt, C, Faci, A. et S. Ray (2018), « Quel effet macroéconomique du PACTE ? Premiers éléments de réponse », Trésor-Eco, No. 226.

-1

7

Growth is resilient, but insufficient to significantly improve living standards

8

Economic growth is resilient Real GDP growth, annual growth (%) 6

6 FRANCE

Euro areaยน

United States

4

4

2

2

0

0

-2

-2

-4

-4

-6

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

1. Euro area member countries that are also members of the OECD (17 countries).

Source: OECD (2019), OECD Economic Outlook: Statistics and Projections (database) and updates.

2018

2019

2020

-6

9

The rise in living standards is lagging behind that in the euro area Real GDP per capitaยน Index, 2001-Q1=100 125

125

120

FRANCE

Germany

Euro area (19 countries)

United States

120

115

115

110

110

105

105

100

100

95

2001

2003

2005

2007

2009

2011

2013

2015

2017

95

1. At constant 2010 USD PPPs. Source: OECD (2019), OECD National Accounts Statistics (database).

10

Growth in disposable income has stagnated Disposable income of French householdsš Index, 2001-Q1=100 130

130

Disposable income

Disposable income adjusted by household composition

125

125

120

120

115

115

110

110

105

105

100

100

95

2001

2003

2005

2007

2009

2011

2013

2015

2017

1. Changes in household incomes, after taxes and social contributions, and deflated by the consumer price index.

Household composition takes into account consumption units (number of adults, number of children and their age).

Source: INSEE (2019), Pouvoir d'achat et ratios des comptes des mĂŠnages.

95

11

Public debt has not decreased Public debtยน % of GDP 140

FRANCE

Germany

Euro areaยน

Portugal

140

130

130

120

120

110

110

100

100

90

90

80

80

70

70

60

60

50

2001

2003

2005

2007

2009

2011

2013

2015

2017

1. According to Maastricht definition. Euro area member countries that are also members of the OECD (17 countries).

Source: OECD (2019), OECD Economic Outlook: Statistics and Projections (database) and updates.

50

12

Operating expenditures are high Operating expenditures1 In percent of GDP, 2017

1.

FRA

FIN

BEL

DNK

NOR

AUT

ITA

DEU

PRT

HUN

LUX

NLD

SVN

OECD

ESP

ISL

0

POL

0

SVK

10

CZE

10

EST

20

CAN

20

JPN

30

LVA

30

AUS

40

NZL

40

USA

50

LTU

50

KOR

60

IRL

60

Total spending excluding interest payments and public investment.

OECD (2019), OECD Economic Outlook: Statistics and Projections (database) and updates.

13

Pension spending is high Public spending on pension, 2016 Percent of GDP

Source: European Commission (2018), "The 2018 Ageing Report”, Brussels.

GRC

ITA

FRA

AUT

PRT

FIN

EA19

0

ESP

0

BEL

2 EU28

2 POL

4

SVN

4

NOR

6

DEU

6

DNK

8

HUN

8

LUX

10

SVK

10

CZE

12

SWE

12

EST

14

GBR

14

LVA

16

NLD

16

LTU

18

IRL

18

14

Main recommendations to reduce public spending and taxes  As part of the “Action Publique 2022” programme, announce precise targets for reducing public expenditures in spending reviews.  Systematically review tax expenditures after some years of implementation and phase them out if not deemed helpful.  Review pension penalties and bonuses to encourage an increase in the effective retirement age and gradual retirement.

15

Key long-term challenges for productivity and inclusiveness

16

Well-being indicators are mixed Country rankings, 2017 from 1 (best) to 35 (worse)ยน 60% middle performers

20% bottom performers

France

20% top performers

3

13

15

15

18

Work-lif e balance

Civic engagement

Housing

Income and Health status wealth

19

21

22

Personal Environmental Jobs and earnings qualit y security

23

24

26

Subje ctive Educatio n and Social connections skills well-being

1. Each well-being dimension is measured by one to four indicators from the OECD Better Life Index set. Normalised indicators are averaged with equal weights.

Source : OECD (2017), Better life index, www.oecdbetterlifeindex.org.

17

Productivity gains are limited GDP per hour worked Average annual % growth rateยน, 1997-2017

1. At constant 2010 USD PPPs. Source : OECD (2018), OECD Productivity Statistics (database).

KOR

POL

SVK

CZE

HUN

ISL

OECD

EA19

USA

0.0

SWE

0.0

FIN

0.5

AUT

0.5

AUS

1.0

JPN

1.0

CAN

1.5

DEU

1.5

GBR

2.0

NLD

2.0

FRA

2.5

DNK

2.5

PRT

3.0

CHE

3.0

NZL

3.5

NOR

3.5

BEL

4.0

ESP

4.0

GRC

4.5

ITA

4.5

18

Poverty is low thanks to social transfers…

Poverty rate % of the population aged 18-65, 20161 Poverty rate after taxes and transfers

Poverty rate before taxes and transfers

1. At 50% of households’ median equivalised income. 2016 or latest year available.

2. Euro area member countries that are also members of the OECD (17 countries).

Source: OECD (2019), OECD Income Distribution and Poverty Statistics (database).

USA

JPN

ESP

GRC

KOR

ITA

PRT

CAN

AUS

OECD

EA²

GBR

NZL

POL

HUN

0

DEU

0

AUT

5

BEL

5

CHE

10

SWE

10

SVK

15

NLD

15

FRA

20

NOR

20

FIN

25

CZE

25

DNK

30

ISL

30

19

… but intergenerational mobility is weak Number of generations to reach mean income1

HUN

FRA

DEU

ITA

PRT

AUT

GBR

USA

KOR

0

CHE

0

EA¹

1

OECD¹

1

GRC

2

ESP

2

BEL

3

JPN

3

NLD

4

AUS

4

CAN

5

NZL

5

FIN

6

SWE

6

NOR

7

DNK

7

1. Expected number of generations it would take the offspring from a family at the bottom 10% to reach the mean income in society. Available countries for the OECD average and euro area member countries that are also members of the OECD. Source : OCDE (2018), A Broken Social Elevator? How to Promote Social Mobility.

20

Main recommendations to enhance well-being and productivity  Continue reforms by minimising and/or offsetting their potential shortterm negative effects on selected population groups

Fostering greener growth  Increase environmental taxes and develop flanking measures for the most affected populations over the short term.  Strengthen the risk assessment of phytosanitary products.

Fostering greener growth  Engage an independent institution to conduct a thorough review of all existing and proposed regulations affecting firms.  Lower transaction costs on housing, notably real estate transfer taxes.

21

Fostering an inclusive development of skills and employment Implementing the OECD Jobs Strategy

22

Progress in the labour market remains limited Employment and unemployment rates % of the population

% of the labour force

64

12 Employment rate, 15-74 year-olds (left axis)

Unemployment rate (right axis)

62

10

60

8

58 6 56 4

54

2

52 50

1998

2002

2006

2010

2014

2018

0

Source: OCDE (2019), OECD Economic Outlook: Statistics and Projections (database) and updates.

23

Significant reforms have been undertaken

24

Labour cost at the minimum wage has decreased Labour cost at the minimum wage % of the median’s labour cost, 2018¹

1. Including the amount of the CICE tax credit; estimates based on a household of one single person with no children.

2. The 2019 estimates for France factor in the reforms of employers’ social security contributions which are taking place in 2019, but they do not take into account the planned increase in the minimum wage in 2019.

Source : OECD (2019), OECD Staff calculations based on the OECD’s TaxBEN model.

25

Recent tax and benefit reforms will help low-income households Simulated effects of reforms on the net minimum hourly income USD-PPPs, 2018¹ 14

14

After reforms ² 12

12

Before reforms 10

10

8

8

6

6

4

4

2

2

0

HUN LVA SVK EST GRC POL PRT TUR CZE SVN ESP USA CAN DEU KOR JPN IRL GBR NZL FRA BEL AUS FRA LUX NLD

0

1. The simulations are based on a household comprising a single individual without children.

2. The reforms considered correspond to the 2018 and 2019 tax and benefit reforms: the cut in employee social security contributions; the reform of the in-work benefits (Prime d’activité) (including measures that came into force on 1 January 2019 – further rises to the Prime d’activité to increase net household income by 90 euros at the level of the minimum wage-).

The increase in the minimum wage in 2019 is not considered. Data before reforms include the CICE.

Source : OCDE (2019), OECD Staff calculations using the OECD TaxBEN model.

26

Difficulties of dismissals for permanent contracts have decreased Strictness of protection for permanent contracts, difficulty of individual dismissals Indicator scale from 0 (least restrictive) to 6 (most restrictive), 2013 et 20181,2

1. Provisional estimates for 2018.

2. Rigidity of employment of employment protection for permanent contracts, sub-indicator of individual dismissals. The assessed difficulties are: procedural inconveniences for employers engaging in a dismissal process, notice periods and severance pay in the case of fair dismissal and the permissible grounds for dismissal and the repercussions for the employer if a dismissal is found to be unfair.

Source : OECD (2019), OECD Staff calculations based on the OECD’s indicators of employment protection.

27

But structural weaknesses remain

28

Too many adults have weak skills As a % of the population aged between 16 and 65, with a PIAAC score lower than 2 60

60

Numeracy only

Literacy only

Literacy and numeracy

TUR

ITA

ESP

GRC

FRA

SVN

USA

IRL

POL

GBR

OECD

CAN

DEU

0

AUS

0

DNK

10

AUT

10

EST

20

SWE

20

BEL

30

CZE

30

SVK

40

NLD

40

FIN

50

JPN

50

Source : OECD (2016), Skills Matter—Further results from the survey of adult skills. OECD skills surveys, OECD Publishing, Paris.

29

Workplace integration of young people with few qualifications is difficult Employment rate of those leaving educationยน % of the population, 2017 100

100 Lower educated, general programme

90

Tertiary educated

90

CZE

LUX

NOR

SWE

DNK

NLD

PRT

LTU

IRL

0

GBR

0

SVK

10

POL

10

CHE

20

LVA

20

HUN

30

AUT

30

DEU

40

EU28

40

FIN

50

EST

50

ESP

60

TUR

60

BEL

70

FRA

70

ITA

80

GRC

80

1. Employment rate of the 20 to 34 age group, among workers who completed their studies with a mid-level qualification (ISCED levels 3 and 4, general programme) or a high-level qualification (ISCED levels 5 to 8) before the survey, and who are not currently enrolled in any other education or training, either formal or informal.

Source : Eurostat (2018), "Labour status of young people by years since completion of highest level of education", Eurostat database.

30

It is difficult to get a permanent contract Transitions from temporary to permanent employment¹ % of employees with temporary contracts, 15-64 years old

0

EST

0

LVA

10

AUT

10

IRL

20

SVK

20

HUN

30

SWE

30

SVN

40

DEU

40

LUX

50

FIN

50

BEL

60

EA²

60

CZE

70

ITA

70

PRT

80

ESP

80

POL

90

GRC

90

NLD

100

FRA

100

1. Probability over three years of transition from a temporary contract to permanent employment.

2. Euro area member countries that are also members of the OECD, excluding Lithuania (16 countries).

Source : OECD (2019), OECD Staff estimates and Eurostat data.

31

Main recommandations for an inclusive development of skills and employment Strengthening job quantity and quality  Mainly focus employer labour tax exemptions on low wages.  Restrict the possibility of receiving unemployment benefits during repeated periods of temporary employment and the reloading of rights over short employment spells.  Modulate labour costs to reduce the excessive use of short-term contracts.  Strengthen apprenticeship in secondary vocational schools, and social and economic integration programs for inactive youth.

32

Main recommandations for an inclusive development of skills and employment Improving labour market inclusiveness  Merge welfare programmes and in-work benefits, taking into account housing benefits and public housing in overall household resources.  Speed up the development of additional childcare services for the poorest households and in poor neighbourhoods.

Stimulating labour market adaptability and resilience  Promote access to vocational training for the least qualified.  Ensure access to transparent information and effective monitoring of the quality of lifelong learning programmes through additional evaluations and counselling.  Encourage a more flexible rental market by developing shorter contracts and the use of rental guarantees.

33

Improving the efficiency of public investment

34

The stock of public capital is large Capital stock as a percentage of GDP, 2015

JPN

LUX

DNK

FIN

GRC

PRT

FRA

SWE

NLD

ITA

ESP

USA

SVN

AUT

KOR

OCDE

0

CHE

0

EST

20

CAN

20

CZE

40

BEL

40

GBR

60

DEU

60

POL

80

HUN

80

SVK

100

IRL

100

LVA

120

AUS

120

Source : IMF (2017), Investment and Capital Stock Statistics (database).

35

The quality of infrastructure is high…

World Economic Forum index¹, 2017

CHE

NLD

JPN

FIN

FRA

AUT

USA

DNK

DEU

PRT

KOR

SWE

LUX

ESP

0

EST

0

CAN

1

OECD

1

GBR

2

BEL

2

AUS

3

CZE

3

SVN

4

HUN

4

IRL

5

GRC

5

ITA

6

LVA

6

POL

7

SVK

7

1.

Index from the lowest perceived quality (0) to the highest (7); the score is based on the assessment of business leaders operating in the country in response to the question: "How do you assess the general state of infrastructure (e.g. transport, communications and energy) in your country?”.

Source : WEF (2018), The Global Competitiveness Report 2017-18 (database), World Economic Forum, Geneva.

36

‌ but investing in maintenance is necessary Maintenance as a share of total rail investment spending Percent 70

70

60

60

50

50

40

40

30

30

20

20

10

10

0

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

0

Source : ITF (2018), Inland Freight Transport (base de donnĂŠes), International Transport Forum, Paris.

37

Investing for the future

38

Greener transport modes can be developed Rail freight market share As a percent of total inland freight transport, 20171

SVN

AUS

LVA

AUT

USA³

CAN

CHE

SWE

EST

FIN

CZE

OECD²

DEU

0

SVK

0

HUN

10

ITA

10

FRA

20

DNK

20

NOR

30

POL

30

GBR

40

JPN

40

PRT

50

NLD

50

KOR

60

ESP

60

GRC

70

IRL

70

1. Or latest year available.

2. Unweighted average for 2015, computed excluding Belgium, Iceland and Israel, for which data are unavailable or incomplete.

3. Total inland freight transport excludes pipelines.

Source : ITF (2018), Inland Freight Transport (base de données), International Transport Forum, Paris.

39

There is room to improve research performance Share of international top publications1 % of publications among the 10% most cited, 20152

1. Share of the scientific output of domestic research institutions that is included in the set of the 10% most cited papers in their respective scientific fields, fractional counts.

2. Or latest year available.

Source : OECD (2017), OECD Science, Technology and Industry Scoreboard 2017, OECD Publishing, Paris.

CHE

NLD

DNK

USA

GBR

BEL

ITA

AUS

SWE

DEU

CAN

0

FIN

0

AUT

2

IRL

2

FRA

4

EST

4

OECD

6

ESP

6

PRT

8

LVA

8

GRC

10

KOR

10

JPN

12

SVN

12

POL

14

CZE

14

HUN

16

SVK

16

40

Main recommendations to improve the efficiency of public investment  Strengthen socio-economic efficiency considerations in the selection of large projects.  Increase the share of infrastructure maintenance spending in public investment.  Give a stronger role to standard unit cost approaches in setting intergovernmental transfers.  Increase horizontal equalisation transfers between local governments to better address territorial disparities.  Promote distance-based and congestion charges to develop alternative transport modes.  Continue to increase universities’ autonomy to define their programmes and manage their staff.  Continue to increase the budget of the National Research Agency.

41

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

http://www.oecd.org/eco/surveys/france-economic-snapshot

@OECDeconomy @OECD

42