Foundations for Growth and Competitiveness 2026

France

France’s GDP per capita falls short of top OECD performers, mainly due to lower labour productivity and weaker employment and participation rates. A persistent investment gap, driven by underinvestment in intangible assets despite higher tangible asset investment, also contributes to sluggish performance. The labour productivity gap widened during the pandemic, largely due to widespread labour hoarding.

Boosting productivity and growth requires better use of talent by improving foundational competencies learned in school, reducing educational inequality, enhancing digital skills, and strengthening vocational outcomes. More effective innovation support, lower barriers in services, and reduced taxes on labour would further boost competitiveness and job creation.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Education: Improve the quality and equity of education

France’s education system faces key challenges that limit employment and productivity by underutilising talent and insufficiently teaching critical thinking and decision making. Student performance is around the OECD average, but reading has declined to below average, with strong socio-economic disparities. Teacher shortages persist, which can impact the quality of teaching. Vocational graduates have poorer job outcomes than general education peers, unlike the OECD average.

Recommendations

✓ Further support disadvantaged students, including by continuing to develop a more progressive allocation of resources across schools and boosting diversity in private schools.

✓ Enhance the attractiveness of the teaching profession by reviewing remuneration, especially for primary and mid-career teachers and supporting training. Supporting teachers’ geographic mobility, career perspectives and training would improve working conditions.

✓ Enhance the employment performance of young people in vocational pathways by strengthening the role for professional counsellors and increasing efforts targeting disadvantaged students.

Employment: Improve youth employment and skills alignment across careers

Young people face significantly higher unemployment rates than adults, particularly those who have low skill levels, and a disproportionate number work under temporary contracts. The low participation of tertiary-educated adults in non-formal job-related training, combined with below-average ICT skills among all adults, worsens skill mismatches and undermines employment prospects over time, particularly for older workers struggling in the labour market.

Recommendations

✓ Better target support, including for apprenticeships, to young people who are the furthest away from finding employment.

✓ Increase close support and better monitor young people’s career paths, including by reducing the administrative burden and increasing resources for public employment services.

✓ Monitor and adapt measures supporting lifelong digital skills by boosting SME participation and optimizing the Individual Learning Account (CPF) to focus more on certified digital training programs.

Innovation: Enhance the impact of innovation and digital policies

Despite robust innovation support, results are mixed. Fewer firms patent or innovate compared to peer countries. Private firms’ collaboration with public R&D is limited, and higher education R&D investment remains low. Strict foreign hiring rules exacerbate skill shortages. Digital adoption is lagging due to low adult ICT proficiency, limited cloud service use and high broadband costs.

Recommendations

✓ Evaluate the effectiveness of innovation support and redesign policies accordingly, giving particular attention to reforming the R&D tax credit, and enhance incentives to private-public cooperation in R&D.

✓ Ease administrative burdens associated with the hiring of high-skilled foreign workers and improve their labour market integration though a smoother recognition of foreign qualifications.

✓ Support firms’ uptake of high-speed broadband by improving the clarity of offers, in terms of fees and services and better controlling the indirect costs of switching.

Competition: Ease barriers to entry and restructuring

France has overall competition-friendly product market regulations; however, barriers to entry in professional services persist, potentially weighing on competiveness and business dynamism. France’s insolvency regime is efficient, although restructuring barriers persist, delaying the exit of non-viable firms and the recovery of those that are viable but struggling. Administrative formalities and barriers to trade in services remain comparatively high, contributing to hamper integration in global value chains and productivity growth.

Recommendations

✓ Streamline entry requirements and relax practice restrictions for architects, accountants, lawyers, and real estate agents to improve competition while safeguarding quality.

✓ Cap the length of stay on assets during restructuring and remove the priority of new financing over secured creditors.

✓ Ease barriers to trade by promoting further automation of administrative formalities and ease electronic transactions.

Taxation: Reduce the complexity of the system and the reliance on labour taxes

Indirect taxes (property and VAT) represent a relatively small share of revenues, as the system is heavily reliant on labour taxes, which can discourage employment and limit productivity. The average tax wedge is comparatively high, reducing incentives for labour market participation. Significant tax expenditures reduce overall collection and could be streamlined based on their effectiveness for growth and equity. The complexity of the tax system further undermines France’s attractiveness to foreign investment.

Recommendations

✓ Consider a shift in the tax base towards broad-based taxes and environmental taxes.

✓ Simplify and improve tax efficiency by further cutting tax expenditures, including fossil fuel subsidies, preferential tax treatment on capital gains and wealth, and exemptions on property taxes.

✓ Once public finances have improved and are balanced, continue to lower taxes on labour and eliminate distortive business taxes.

Recent progress on structural reforms

Apprenticeship support has expanded, though it has been costly and may have substituted for other jobs. The 2025 reform, which narrows apprenticeship eligibility to less-educated students, is a welcome improvement. Since 2018, France has reduced administrative barriers with a one-stop business registration and easier digital market entry. Primary education funding rose 41% from 2012 to 2020. Teacher pay improvements and stronger links between schools and employers continue, driven by the 2023 vocational reform.