France, inequality and the social elevator

by Laurence Boone, OECD Chief Economist, and Antoine Goujard, Head of the France Desk, OECD Economics Department

The recent yellow-vest demonstrations could well be simply a variant of the regional and social divides potentially linked to the same trend towards a rejection of globalisation that has emerged in a number of OECD countries. That is probably partly true, but the reasons for this movement are also rooted in a profound inequality of opportunity. It takes more than six generations in France for a person at the bottom end of income distribution to reach the mean. More than 15% of 15-year-olds have poor numeracy and comprehension skills, which are likely to lead to difficulties in finding work later. Of all the OECD countries, only Hungary shows more social determinism than France.

Inequalities
of opportunity that are reproduced throughout the educational system and from
one generation to another

Contradicting
the oft-repeated assertion, France suffers not from insufficient income redistribution
but from an inequality of opportunity that perpetuates economic and social
situations from one generation to the next.
In
other words, the social elevator is broken and has been for some time. That
inequality of opportunity hits not only the poorest: it also to some extent affects
the middle classes.

Disparities between socio-professional categories and regions take
root at a very early age.
Although much early childhood education and care is provided
through the social system and with state support, only 30% of children in the
least well-off third of the population benefit from so‑called “formal” childcare
services (nurseries, daycare or qualified childminders), compared with nearly
60% for the population as a whole. It is partly a question of access: such
services are more or less well-developed depending on the municipality or
neighbourhood. Yet they are important factors in a young child’s early
learning, development and socialisation.

The disadvantages of a low-income socio-economic background persist at school. The OECD’s PISA studies assess the educational performance of 15-year-olds. The studies show that 15% of schoolchildren in France have low skills in reading comprehension and mathematics, one of the highest rates across OECD countries. They also show that the level of influence of social background on educational attainment is one of the highest among OECD countries. This is particularly true in mathematics, a subject which, as is well-known, has a considerable effect in France on access to the best educational opportunities. Here again local differences play a significant part, since it is more difficult to attract experienced teachers to some schools and some geographical areas concentrate pupils in difficulty.

Differences in educational level affect access to employment. The
proportion of young people not in education, employment or training (NEET) in
France is higher than the European Union average. Access to employment differs
considerably according to level of qualification, and the premium for the most
highly qualified is significantly higher than elsewhere. The employment rate of
those leaving the educational system with an average general-education diploma
(secondary or non-higher post-secondary) is 51%, one of the lowest in the
European Union (only Italy and Greece score worse). In contrast, the employment
rate for higher-education graduates is 83%, close to the EU average.

These differences in access to employment are persistent, not least because the lifelong learning system fails to remedy them among the low-skilled. The high proportion of low-skilled young people persists from one generation to the next and the proportion of low-skilled adults is also one of the highest in OECD countries: France ranks fifth among countries where adult skills are lowest as measured by PIAAC, the OECD’s adult skills survey. This is not corrected by access to training. First, the low-skilled are 50% less likely than others to have access to training. Second, the rate of participation in formal training in the array of available lifelong learning options is again one of the lowest among OECD countries. Recent reforms are seeking to change this situation, but much remains to be done. While recent one-off plans have helped to give the unemployed access to training, the same does not apply to the inactive.

Income gaps reflect disparities in access to employment and in taxation. In France, the
income of the poorest 20% of the population, as well as the median disposable
income, did not increase between 2008 and 2016. The targeted reduced rates of
social security contributions may have significantly lowered the cost of labour
for those on the minimum wage, but those contributions continue to weigh
heavily on the median wage. Employers’ contributions as a proportion of gross
wages are very low for the minimum wage (4% after the latest reductions), but
rise to 36% for the median wage, a unique gap among OECD countries. Although
this helps to provide welcome support for low-skilled jobs, it probably also
holds back the increase in income between the minimum and the median wage,
which may partly explain why there has been little gains in the purchasing
power of the low-paid.

Redistribution corrects the most flagrant inequalities but does little to benefit the middle classes. The redistribution system in France is extensive and does much to correct poverty through substantial transfers to the least well-off households. Nonetheless, income inequalities before taxes and transfers are high in relation to the OECD average. Taxes and transfers, including unemployment benefits and pensions, merely reduce inequalities in income distribution to the OECD average. That suggests less redistribution of transfers net of tax to the middle classes.

Substantial housing costs add to these
income disparities.
Housing costs are a major item of basic household expenditure, and
housing as a share of household consumption in France is higher than the
European average. Again, a substantial social housing stock and significant
housing benefits help to correct this for the least well-off households. Not
all such households receive them, however, and middle-class households even
less so.

In conclusion, redistribution
through taxes and social transfers is a powerful way of reducing income
inequality but substantial inequalities of opportunity remain, mostly linked to
the educational system.
Redistribution supports the standard of living of the poorest
households but fails to correct disparities in the middle of the distribution
range. Above all, it is not sufficient to curb inequality of opportunity linked
to socio-economic background or territorial inequalities. The urgent need to give everyone a chance to succeed will require
reform of the education system to ensure that through education and training every
child has an opportunity to advance, from early childhood and throughout his or
her life, and that every adult who has missed a step can catch up.
The next
OECD survey of France, to be published in April, will contain recommendations
along those lines.