France

France must continue its reform process to boost growth and jobs

 

02/04/2015 - France has begun implementing a series of important pro-growth structural policy measures, but boosting medium-term growth will require more ambitious action to reform the labour market, curb high levels of public spending and taxation and create jobs, according to the latest OECD Economic Survey of France.


The Survey, presented in Paris by OECD Secretary-General Angel Gurría and French Minister of Finance and Public Accounts Michel Sapin, points out that France’s annual per capita GDP growth has been below the OECD average for the better part of two decades and unemployment has been well above the OECD average.

The Survey praises reforms that have been undertaken in recent years to improve productivity and competitiveness, such as the Crédit d’Impôt pour la Compétitivité et l’Emploi (CICE), the Pacte de responsabilité et de solidarité, the administrative simplification efforts, and the strengthening of competition as well as vocational training and apprenticeships. The current bill « pour la croissance, l’activité et l’égalité des chances économiques » and the reform of social dialogue are also steps in the right direction.

While the French economy is projected to grow by 1.1% in 2015 and 1.7% in 2016, the Survey says that the outlook is fragile and insufficient to bring down unemployment significantly.

“France has considerable economic assets, which have helped it maintain a high standard of living while keeping income inequality at low levels,” Mr Gurría said. “The economic recovery is underway, but unemployment is at high levels, and public finances remain weak, with chronic deficits and rising public debt. Achieving stronger, more inclusive, sustainable growth will require additional reforms that substantially improve the outlook for growth and job creation.” (read the full speech in French)

 

Further labour market reforms should be the top priority. Regulations on open-ended contracts hinder labour mobility and create significant duality with workers on temporary contracts, notably younger workers. To address this, France can simplify and shorten layoff procedures, notably through reforms to the labour courts, the Survey said.

The Survey also recommends that France lower public spending - which represented 57% of GDP in 2014, among the highest levels in the OECD - to allow tax cuts, especially on labour. Substantial savings are possible through a rationalisation of the organisation, spending and mandates of local government, and holding down social spending on the health care, pension and unemployment insurance systems.


Despite the recent measures to lower the tax wedge on labour, it remains amongst the highest in the OECD, except for low wages. Shrinking the tax wedge and avoiding discretionary increases in the minimum wage will improve the competitiveness of the cost of labour.


With complex governance and weak quality controls, the vocational education system is not adequately providing skills and training to those who need it most. More can be done to strengthen quality control, and ensure adequate funding and proper oversight of vocational education and training programmes, including apprenticeships.


Reducing barriers to competition, opening closed sectors and continuing reforms to simplify the business environment will improve the outlook for growth, equity and job creation.


In addition to these reforms, better governance and targeting of social and educational policies towards the most vulnerable, in particular to address the high levels of educational performance inequality linked to socio economic background, would enable France to fulfil its ambitious economic and social objectives.

An Overview of the Economic Survey, with the main conclusions, is freely accessible on the OECD’s web site at: http://oecd.org/france/economic-survey-france.htm. You are invited to include this Internet link in reports on the Survey.

 
A one-page summary of the Survey can be consulted at: http://www.oecd.org/eco/surveys/France-2015-flyer.pdf.

 
An embeddable version of the Economic Survey is also available, together with information about downloadable and print versions.                                                                                                                                

For further information on the Economic Survey, contact the OECD Media Office (+33 1 4524 9700).

Presentation of the OECD Economic Survey of France

OECD Secretary-General Angel Gurría and French Minister of Finance and Public Accounts Michel Sapin

 

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