2019 OECD ECONOMIC SURVEY OF FRANCE Towards more inclusive growth - - PowerPoint PPT Presentation

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

2019 OECD ECONOMIC SURVEY OF FRANCE

Towards more inclusive growth and employment

Paris, 9 April 2019

@OCDE @OECDeconomy

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Main themes

Labour market performance and implementation of the OECD Jobs Strategy Key long-term challenges France’s assets and reform agenda Efficiency of public investment Growth is resilient, but insufficient

France’s assets and reform agenda

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France’s productivity is high

GDP per hour worked, level

Current USD PPPs, 2017

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

10 20 30 40 50 60 70 80 90 10 20 30 40 50 60 70 80 90 HUN KOR POL GRC PRT CZE NZL SVK JPN CAN OECD ESP ITA AUS GBR EA19 ISL FIN FRA SWE CHE NLD USA DEU AUT DNK BEL NOR

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Health-adjusted life expectancy is high

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.

Years, 2016¹

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The ongoing reform agenda is ambitious

GDP per capita 2017-18 labour market reforms 1.4

• Higher targeted spending on lifelong learning, increased

flexibility of employment protection, lower administrative extension

• f branch-level agreements.

Tax measures 1.4

• Reduced tax wedge, reduction of capital income taxation,

steady increase in in-work benefits. 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

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.

Potential impact of some ongoing reforms

GDP per capita after 10 years (%)

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Reforms will benefit lower- and middle- income households

Illustrative increases in disposable income over the long term By income groups, %

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

1 2 3 4 5 6 7 8 9

• 1

1 2 3 4 5 6 7 8 9

The poor Lower middle-class Mean Upper middle class The rich

Product market and simplification measures² Tax measures 2017-18 labour market reforms Total effects

Growth is resilient, but insufficient to significantly improve living standards

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Economic growth is resilient

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.

Real GDP growth, annual growth (%)

• 6
• 4
• 2

2 4 6

• 6
• 4
• 2

2 4 6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 FRANCE Euro area¹ United States

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The rise in living standards is lagging behind that in the euro area

Real GDP per capita¹

Index, 2001-Q1=100

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

95 100 105 110 115 120 125 95 100 105 110 115 120 125 2001 2003 2005 2007 2009 2011 2013 2015 2017 FRANCE Germany Euro area (19 countries) United States

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Growth in disposable income has stagnated

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 ménages.

Disposable income of French households¹

Index, 2001-Q1=100

95 100 105 110 115 120 125 130 95 100 105 110 115 120 125 130 2001 2003 2005 2007 2009 2011 2013 2015 2017

Disposable income Disposable income adjusted by household composition

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Public debt has not decreased

Public debt¹

% of GDP

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 60 70 80 90 100 110 120 130 140 50 60 70 80 90 100 110 120 130 140 2001 2003 2005 2007 2009 2011 2013 2015 2017

FRANCE Germany Euro area¹ Portugal

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Operating expenditures are high

1. Total spending excluding interest payments and public investment. OECD (2019), OECD Economic Outlook: Statistics and Projections (database) and updates.

Operating expenditures1 In percent of GDP, 2017

10 20 30 40 50 60 10 20 30 40 50 60 IRL KOR LTU USA NZL AUS LVA JPN CAN EST CZE SVK POL ISL ESP OECD SVN NLD LUX HUN PRT DEU ITA AUT NOR DNK BEL FIN FRA

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Pension spending is high

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

Public spending on pension, 2016 Percent of GDP

2 4 6 8 10 12 14 16 18 2 4 6 8 10 12 14 16 18 IRL LTU NLD LVA GBR EST SWE CZE SVK LUX HUN DNK DEU NOR SVN POL EU28 BEL ESP EA19 FIN PRT AUT FRA ITA GRC

 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.

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Main recommendations to reduce public spending and taxes

Key long-term challenges for productivity and inclusiveness

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Well-being indicators are mixed

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.

Country rankings, 2017

from 1 (best) to 35 (worse)¹

3 13 15 15 18 19 21 22 23 24 26

Work-life balance Civic engagement Housing Income and wealth Health status Personal security Environmental quality Jobs and earnings Subjective well-being Education and skills Social connections

20% bottom performers 60% middle performers 20% top performers France

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Productivity gains are limited

• 1. At constant 2010 USD PPPs.

Source : OECD (2018), OECD Productivity Statistics (database).

GDP per hour worked

Average annual % growth rate¹, 1997-2017

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 ITA GRC ESP BEL NOR NZL CHE PRT DNK FRA NLD GBR DEU CAN JPN AUS AUT FIN SWE USA EA19 OECD ISL HUN CZE SVK POL KOR

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Poverty is low thanks to social transfers…

Poverty rate

% of the population aged 18-65, 20161

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).

5 10 15 20 25 30 5 10 15 20 25 30

ISL DNK CZE FIN NOR FRA NLD SVK SWE CHE BEL AUT DEU HUN POL NZL GBR EA² OECD AUS CAN PRT ITA KOR GRC ESP JPN USA

Poverty rate after taxes and transfers Poverty rate before taxes and transfers

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… but intergenerational mobility is weak

• 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.

Number of generations to reach mean income1

1 2 3 4 5 6 7 1 2 3 4 5 6 7 DNK NOR SWE FIN NZL CAN AUS NLD JPN BEL ESP GRC OECD¹ EA¹ CHE KOR USA GBR AUT PRT ITA DEU FRA HUN

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Main recommendations to enhance well-being and productivity

 Continue reforms by minimising and/or offsetting their potential short- term 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.

Fostering an inclusive development

• f skills and employment

Implementing the OECD Jobs Strategy

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Progress in the labour market remains limited

% of the population % of the labour force

Employment and unemployment rates

Source: OCDE (2019), OECD Economic Outlook: Statistics and Projections (database) and updates. 2 4 6 8 10 12 50 52 54 56 58 60 62 64 1998 2002 2006 2010 2014 2018 Employment rate, 15-74 year-olds (left axis) Unemployment rate (right axis)

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Significant reforms have been undertaken

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Labour cost at the minimum wage has decreased

Labour cost at the minimum wage

% of the median’s labour cost, 2018¹

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

• 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.

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Recent tax and benefit reforms will help low-income households

Simulated effects of reforms on the net minimum hourly income

USD-PPPs, 2018¹

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. 2 4 6 8 10 12 14 2 4 6 8 10 12 14 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

After reforms ² Before reforms

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Difficulties of dismissals for permanent contracts have decreased

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.

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

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But structural weaknesses remain

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Too many adults have weak skills

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

As a % of the population aged between 16 and 65, with a PIAAC score lower than 2

10 20 30 40 50 60 10 20 30 40 50 60 JPN FIN NLD SVK CZE BEL SWE EST AUT DNK AUS DEU CAN OECD GBR POL IRL USA SVN FRA GRC ESP ITA TUR Numeracy only Literacy only Literacy and numeracy

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Workplace integration of young people with few qualifications is difficult

• 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.

Employment rate of those leaving education¹ % of the population, 2017

10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100 GRC ITA FRA BEL TUR ESP EST FIN EU28 DEU AUT HUN LVA CHE POL SVK GBR IRL LTU PRT NLD DNK SWE NOR LUX CZE Lower educated, general programme Tertiary educated

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It is difficult to get a permanent contract

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.

Transitions from temporary to permanent employment¹

% of employees with temporary contracts, 15-64 years old

10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100 FRA NLD GRC POL ESP PRT ITA CZE EA² BEL FIN LUX DEU SVN SWE HUN SVK IRL AUT LVA EST

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.

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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.

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Main recommandations for an inclusive development of skills and employment

Improving the efficiency of public investment

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The stock of public capital is large

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

Capital stock as a percentage of GDP, 2015

20 40 60 80 100 120 20 40 60 80 100 120 AUS LVA IRL SVK HUN POL DEU GBR BEL CZE CAN EST CHE OCDE KOR AUT SVN USA ESP ITA NLD SWE FRA PRT GRC FIN DNK LUX JPN

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The quality of infrastructure is high…

World Economic Forum index¹, 2017

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.

1 2 3 4 5 6 7 1 2 3 4 5 6 7 SVK POL LVA ITA GRC IRL HUN SVN CZE AUS BEL GBR OECD CAN EST ESP LUX SWE KOR PRT DEU DNK USA AUT FRA FIN JPN NLD CHE

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… but investing in maintenance is necessary

Maintenance as a share of total rail investment spending Percent

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

10 20 30 40 50 60 70 10 20 30 40 50 60 70 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

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Investing for the future

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Greener transport modes can be developed

• 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.

Rail freight market share As a percent of total inland freight transport, 20171

10 20 30 40 50 60 70 10 20 30 40 50 60 70 IRL GRC ESP KOR NLD PRT JPN GBR POL NOR DNK FRA ITA HUN SVK DEU OECD² CZE FIN EST SWE CHE CAN USA³ AUT LVA AUS SVN

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There is room to improve research performance

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.

Share of international top publications1 % of publications among the 10% most cited, 20152

2 4 6 8 10 12 14 16 2 4 6 8 10 12 14 16 SVK HUN CZE POL SVN JPN KOR GRC LVA PRT ESP OECD EST FRA IRL AUT FIN CAN DEU SWE AUS ITA BEL GBR USA DNK NLD CHE

 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.

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Main recommendations to improve the efficiency of public investment

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.

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@OECDeconomy @OECD