Tribune. The discussion on pension reform should not be reduced to a parametric debate on the savings it would make possible. It should above all concern training, access to employment and working conditions for seniors. Similarly, the other investments that France must devote to almost all essential sectors – health, education, the fight against climate change – must not fall victim to a purely budgetary approach either, which could lead poorly calibrated expenditure, due to a lack of overall consistency. Thus, it is the welfare state of the XXIe century and its financing which should be the real subject of the presidential debate.
Emmanuel Macron’s five-year term was, in this respect, more ambivalent than one might think. Household income has increased by 300 euros per year on average, whereas it had almost stagnated during the mandate of François Hollande. However, this increase is explained by the increase in employment but also by the fall in taxation: gradual abandonment of the housing tax, reduction in capital taxation, tax exemption for overtime. This reduction in taxation, and the assumed refusal of any tax increase, has thus led to an increase in public debt of 16 points of GDP over the five-year period, despite an environment of very low interest rates, it is true. The measures following the movement of “yellow vests”, the “whatever it costs” in the face of Covid-19, the inflation check or the fuel discount of 15 cents have not been compensated, nor by tax increases , nor by austerity measures.
New investments
Similarly, budgetary expenditure and the public debt have made it possible to support income: tax exemption for overtime and the activity bonus were preferred to an increase in the minimum wage or the index point for the civil service. Budgetary support for apprenticeship contracts – the exceptional aid put in place in 2020 covers at least 80% of an apprentice’s salary – and for professionalization contracts has led to their increase by 50% over the five-year period, helping to reduce youth unemployment.
What were the effects of this policy on inequalities? According to estimates by the French Observatory of Economic Conditions, the income of the poorest households benefited from the cash transfer during the health crisis and from the increase in employment. The income of the middle classes has increased thanks to the reduction in housing tax and the tax exemption for overtime. The upper middle classes are those which, in proportion to their income, have benefited the least from this policy. But it is the richest 10%, or even 1%, who have benefited the most: the reduction in capital taxation has not had the announced positive effects on investment, but has concentrated income gains on the highest estates. The overall form of gains thus follows an “elephant” curve with an increase for the middle classes, a decrease for the upper middle classes and a significant increase for the richest.
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