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Productivity and long term growth

Going for Growth 2016: France

 

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France enjoys levels of productivity that are among the highest in the OECD, but the unemployment rate remains considerably above the pre-crisis level, which along with a low labour force participation rate contributes to low employment. Reform priorities include removing impediments to job creation, notably through a reduction of regulatory barriers to entry in sectors with strong employment potential and via a shift in the burden of taxation away from labour.

1. Employment rate is measured as total number of employed divided by working-age population. Hours worked are measured as total number of hours worked per employee. Working-age population is measured as working-age population divided by total population.

Source: OECD, National Accounts, Productivity, Employment Outlook and Economic Outlook Databases.

Previous Going for Growth recommendations include:

  • Reforming job protection and strengthening active labour market policies (ALMPs) by making open-ended contracts more flexible, while ensuring that every jobseeker receives an employment or training offer within a few months; and by evaluating and streamlining ALMPs. 
  • Shifting the tax burden away from labour and broadening the tax base, notably by lowering social security contributions while shifting the funding of benefits that accrue to society at large, such as those for families, to less distortive taxes (e.g. environmental, real property and inheritance taxes).
  • Improving equity and outcomes in primary and secondary education by tackling school failure at an early stage, limiting grade repetition drastically, developing individualised instruction and boosting incentives to attract high-quality teachers.
  • Reducing regulatory barriers to competition by easing those regulations of professional services that go beyond necessary consumer protection, by facilitating retail price competition and by removing entry barriers in potentially competitive segments of network industries
  • Improving the quality of higher education and access to lifelong learning by allowing universities to raise tuition fees while providing student loans with income-contingent repayment, and by enhancing training opportunities for the low-skilled.

 

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Recent policy actions in these areas include:

  • A recent reform (Loi Macron) eases entry regulation in legal services somewhat and facilitates the creation of firms that can offer a wide range of legal and accounting services in the same entity. It also expands the possibility for stores to open on Sundays, especially in specific areas defined as international touristic zones (albeit subject to agreements between store management and unions) and introduces a liberalisation of long-distance passenger coach services.
  • A new individualised guidance system designed for secondary-school students to prevent early drop out.
  • Priority education networks that allocate funding and teacher training across schools based on the social characteristics of their students.
  • The incentives for low-income households to work have been raised through the integration and better targeting of two existing in-work benefit measures.
  • An agreement reached by social partners will raise incentives for workers covered by complementary pensions to stay longer in the labour force.

The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, narrowing current account imbalances and reducing income inequality). In the case of France, shifting the financing of some spending items from social contributions to other tax bases, simplifying the tax system and eliminating tax loopholes would promote employment and competitiveness. Reducing educational inequalities and improving skills throughout working lifetimes would also increase employment and reduce inequality.

Economic Policy Reforms 2016 

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