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 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 HUN KOR POL CZE NZL SVK ESP ITA GBR EA19 FIN FRA CHE DNK BEL GRC PRT JPN CAN OECD AUS ISL SWE NLD USA DEU AUT NOR Source: OECD (2019), OECD Productivity Statistics (database). 4
Health-adjusted life expectancy is high Years, 2016 ¹ 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 1.4 - Higher targeted spending on lifelong learning, increased flexibility of employment protection, lower administrative extension of 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 6 du PACTE ? Premiers éléments de réponse » , Trésor-Eco, No. 226.
Reforms will benefit lower- and middle- income households Illustrative increases in disposable income over the long term By income groups, % 9 9 Product market and simplification measures² Tax measures 8 8 2017-18 labour market reforms Total effects 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 -1 -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 7 du PACTE ? Premiers éléments de réponse » , Trésor-Eco, No. 226.
Growth is resilient, but insufficient to significantly improve living standards 8
Economic growth is resilient Real GDP growth, annual growth (%) 6 6 FRANCE Euro area¹ United States 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 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 . 9
The rise in living standards is lagging behind that in the euro area Real GDP per capita¹ Index, 2001-Q1=100 125 125 FRANCE Germany 120 120 Euro area (19 countries) United States 115 115 110 110 105 105 100 100 95 95 2001 2003 2005 2007 2009 2011 2013 2015 2017 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 households¹ 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 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 ménages . 11
Public debt has not decreased Public debt ¹ % of GDP 140 140 FRANCE Germany Euro area¹ Portugal 130 130 120 120 110 110 100 100 90 90 80 80 70 70 60 60 50 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 . 12
Operating expenditures are high Operating expenditures 1 In percent of GDP, 2017 60 60 50 50 40 40 30 30 20 20 10 10 0 0 IRL KOR NZL LVA EST CZE SVK POL ESP SVN HUN ITA DNK BEL FIN FRA LTU USA AUS JPN CAN ISL OECD NLD LUX PRT DEU AUT NOR 1. 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 18 18 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 IRL LVA GBR EST CZE SVK HUN DNK SVN POL BEL ESP EA19 FIN FRA ITA LTU NLD SWE LUX DEU NOR EU28 PRT AUT GRC Source : European Commission (2018), "The 2018 Ageing Report”, Brussels. 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)¹ 20% bottom performers 60% middle performers 20% top performers France 3 13 15 15 18 19 21 22 23 24 26 Work-life Civic Housing Income and Health status Personal Environmental Jobs and Subjective Education and Social balance engagement wealth security quality earnings well-being skills connections 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 rate¹, 1997-2017 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 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 1. At constant 2010 USD PPPs. Source : OECD (2018), OECD Productivity Statistics (database). 18
Poverty is low thanks to social transfers… Poverty rate % of the population aged 18-65, 2016 1 Poverty rate after taxes and transfers Poverty rate before taxes and transfers 30 30 25 25 20 20 15 15 10 10 5 5 0 0 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 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). 19 Source : OECD (2019), OECD Income Distribution and Poverty Statistics (database).
… but intergenerational mobility is weak Number of generations to reach mean income 1 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 DNK NZL BEL ESP CHE KOR GBR FRA HUN NOR SWE FIN CAN AUS NLD JPN GRC OECD¹ EA¹ USA AUT PRT ITA DEU 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. 20 Source : OCDE (2018), A Broken Social Elevator? How to Promote Social Mobility.
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. 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 0 1998 2002 2006 2010 2014 2018 Source: OCDE (2019), OECD Economic Outlook : Statistics and Projections (database) and updates . 23
Significant reforms have been undertaken 24
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