OECD Economic Surveys: France 2026

Boosting the employment rate would support growth. While the employment rate has improved over the past decade, it has increased by less than in the highest performing countries and, at 69.4% among those aged 15-64 in 2025, remains slightly below the OECD average of 70.4%. The gap among older and younger workers is particularly sizeable. The employment rate among those aged 60-64 is 12.2 percentage points below the OECD average. This underscores the need to pursue efforts to identify older workers at risk of dropping out of the labour market earlier, improve coordination among health and employment institutions to better support work environments to adapt to the needs of older workers and expand access to lifelong learning. The employment rate of young people (20-24 year olds) also remains 3.8 percentage points below the OECD average, despite gains driven by apprenticeships. Further expanding work-based (dual) vocational pathways and policies for young people not in employment, education or training would support their integration into the labour market.

Structural bottlenecks in productivity growth persist. Business research and development (R&D) and technology adoption lag OECD averages. At the same time, declining human capital accounts for 20% of the productivity slowdown observed between 1987-2005 and 2005-2022, and the gap in adults’ skills (as measured by PIIAC) compared to the top-performing countries accounts for half of the sectoral productivity gap. Enhancing the effectiveness of policies supporting skills development, technology adoption and innovation is essential to boost GDP per capita. Rising defence spending presents an opportunity to boost productivity, particularly by increasing investment in R&D in areas that support both civilian and military applications.

The fiscal deficit has continued to widen and public debt has risen steadily. Additionally, the risks of further deterioration are increasing due to higher interest rates as well as rising spending due to population ageing, the climate transition and defence. To put debt on a sustainable path, sizeable and sustained fiscal consolidation is needed.

Between 2008 and 2025, France’s fiscal deficit widened from 3.5% to 5.1% of GDP. France only reversed about half of the increase in spending during the Global Financial Crisis, less than in the euro area. Following the pandemic, revenue losses from tax reforms more than offset efforts to cut spending. Following a major consolidation effort in 2025, adhering to the commitments of the medium-term consolidation plan in accordance with European rules is key to strengthening France’s credibility. This requires adherence to multi‑year commitments on spending growth in order to put the public debt ratio on a durable downward path.

Stabilising the public debt-to-GDP ratio by 2030 requires sizeable fiscal consolidation. Public debt increased from 60% of GDP in 2000 to 115.5% of GDP in 2025 (Figure 2), while debt-servicing costs rose from 1.3% of GDP in 2020 to 2.1% of GDP in 2025, which would put fiscal sustainability at risk if this trend continues. The pace of fiscal consolidation of more than 1 percentage point of GDP in 2025 will need to be sustained, cumulating to around 3 percentage points by 2030 to stabilise debt at 122% of GDP.

The scale of fiscal consolidation calls for a sequenced and comprehensive package. Measures already taken in the 2025 and 2026 budgets should deliver rapid savings by temporarily freezing pensions and increasing revenues. However, medium-term efforts should aim primarily to reduce the comparatively very high public expenditure ratio by strengthening spending efficiency through spending reviews and reducing inefficient tax expenditures. In a second phase, once fiscal margins have been restored, reducing the rates on the most distortionary taxes will help boost investment and employment.

Ageing is set to increase spending pressures further. The pension reform has been postponed, but its implementation should resume as soon as planned and the retirement age should, at minimum, be linked to life expectancy. This would boost employment while reducing spending increases and raising revenues. Aligning taxes on retirees and workers and removing retirees’ 10% income tax allowance would allow for a fairer cost-sharing of ageing costs and improve intergenerational equity.

Efficiency gains would help deliver cost-effective public support while preserving strong social protection. Duplication and high coordination needs across subnational governments suggest scope to streamline services. Per-capita spending on health and education exceeds that of high-performing countries. Potential reforms in education include adjusting vocational class sizes, refocusing apprenticeships, increasing financial contributions of tertiary students combined with scholarships based on means testing. Spending on primary education and lifelong learning, which are both vital for future growth, should be preserved but could be better targeted. In health, reforms could promote greater preventive care and use of generic pharmaceuticals and biosimilars.

The tax system could be more efficient, growth-friendly, and inclusive. The labour-heavy tax burden could shift towards broader-based taxes or taxes that are less detrimental to growth (such as consumption or property taxes). Social security reductions on mid-level wages are costly, with limited gains to employment and investment. Limiting reductions to workers earning less than twice the minimum wage would allow for savings to increase training and reducing the most distortive taxes on production. Systematically reviewing tax expenditures, which are large, at close to 3% of GDP, would help ensure that they effectively support social, employment, and investment objectives. Effective corporate tax rates are near the OECD average, suggesting room to cut inefficient tax exemptions. Wealth taxation could be made fairer by taxing latent capital gains within inheritance taxes, limiting further tax-free transfers and aligning capital gains taxes across individuals and holdings.

France’s demand for long-term care is set to increase with the ageing of the population. Better targeting of support for long-term care and investing in healthier ageing should limit fiscal pressures. In parallel, the quality of care would benefit from more access to a standard minimum level of service across the country and better working conditions of care workers.

France is facing a challenge in ensuring adequate and high-quality home-based care. Furthermore, the quality of care varies across the country. The long-term care sector suffers from shortages of personal care workers and nurses and pressures will intensify as demand increases. Continuing to strengthen working conditions, training, career development and social recognition would boost the profession’s attractiveness. As most older people receive at least some informal care from family and friends, continued support for informal carers is essential to reduce negative effects on their health and labour market outcomes and ultimately GDP.

The level of the personalised autonomy allowance, a key form of public support mainly funded by subnational governments, varies across the country. Local authorities face different spending pressures, reflecting differences in population ageing and competing policy responsibilities. Defining a minimum service offer provided by the allowance could help ensure more equal access to long-term care across the country.

More efficient spending could help reduce the funding deficit. In the short term, greater use of digital technologies, better identifying older people at risk and greater rehabilitation would help reduce spending. In parallel, updating the care needs assessment for determining public support to better account for cognitive, behavioural and social limitations would help ensure older people get the care they need. In the medium term, increasing spending on preventive care and investing in healthy ageing can help lower health and long-term care expenditure. Improving data availability, extending multi-year projections and strengthening spending oversight will further enhance policy effectiveness.

Despite efficiency gains, additional spending on long-term care will increase financing needs. Aligning the social security contributions of older people with those of workers with the same income level could be one source of additional funding. At the same time, poverty risks should be avoided, as older people can face significant out-of-pocket costs (Figure 3). Strengthening targeting of public support for long-term care to older people with severe needs and low incomes could help minimise these risks.

France needs to accelerate efforts to meet its ambitious emissions targets and adapt to rising climate risks. Increasing price incentives will reduce emissions while raising revenues for investment, including targeted support. Strengthening incentives for prevention efforts and local adaptation strategies would help France to adapt to its greater exposure to climate risks, such as fires, drought and flooding.

Making use of all economic instruments would help reduce emissions and improve efficiency. Average carbon prices are low relative to peers and remain uneven across sectors, and alongside support for fossil fuels, reduces the effectiveness of pricing tools. Further aligning carbon prices and taxing polluting activities in line with their environmental impacts, including phasing out fossil fuel subsidies, would strengthen mitigation efforts. More predictable and stable climate policies would improve their effectiveness.

The building and transport sectors account for nearly half of emissions and face large investment needs. However, many of the actors involved do not have the capacity to undertake these investments and require public support. Aligning the tax rates between diesel and gasoline, and introducing congestion pricing where relevant, would incentivise greener transport while generating revenue to finance investment. Reinforcing targeted support for energy-efficiency renovations towards low-income households and renovations with the largest energy-efficiency gains would improve spending efficiency. Providing more support for low-interest loans can also help alleviate some of the financial constraints.

France needs to strengthen resilience and increase adaptation to reduce the costs of climate change (Figure 4). Strengthening local adaptation strategies would support green infrastructure investment. Greater support for research and continuing to evaluate effective prevention measures would help advance efficient technical solutions. Strengthening adaptation measures, including addressing market failures, and providing incentives to invest in prevention through targeted support measures and subsidies for a wider range of measures would encourage investment.

Manufacturing deindustrialisation processes in France have been sharper than for the OECD average, driven partly by weaker export performance but mostly by structural changes, including the shift of the economy towards services. Strengthening industrial competitiveness requires a multipronged approach to boost innovation, resilience, and human capital, alongside measures to support price competitiveness. Amid tight budget constraints and the costs associated with industrial policies, it is essential to assess the effectiveness of such spending and to direct resources towards their most efficient uses.

Boosting industrial innovation and non-cost competitiveness requires more efficient R&D policies and targeted support for emerging technologies. Private sector R&D remains modest by international standards, despite one of the most generous support schemes for private R&D among OECD countries. France has strengths in artificial intelligence (AI), quantum technology, cybersecurity, digital health, and clean energy, but these have yet to deliver productivity gains or global competitiveness. Focusing further direct support on key priorities, enhancing knowledge transfers out from the public research sector and further refocusing R&D tax incentives would increase the efficiency of innovation policies. Further deepening venture capital markets and greater mobilisation of institutional and household savings to fund innovative firms is needed, particularly through a risk-sharing mechanism. Speeding up insolvency proceedings and improving the resale of assets would help expand the role for banks in financing intangibles. Rising concentration and “winner-takes-all” dynamics call for strengthening competition authorities’ capacity and mandate to limit the risks of value capture at the expense of its dissemination throughout the economy.

Deeper integration into global value chains, digitalisation, and decarbonisation pose rising challenges to industrial competitiveness. Greater reliance on intermediate inputs has increased France’s exposure to shocks, calling for diversification, reshoring, and circular solutions. The concentration of AI capabilities among a few players risks blocking market entry for new participants and creating technological dependence, underscoring the need for specialisation in selected segments of the AI value chain. Stricter environmental standards affect French industrial competitiveness. The carbon border adjustment mechanism (CBAM) and decarbonisation are key future drivers of competitiveness that could be reinforced by targeted, temporary support and strengthened innovation in low-carbon technologies.

Skills gaps strongly limit industrial innovation and productivity. Human capital needs to be better mobilised, including fostering the insertion of PhD holders into private R&D activities, attracting foreign talent, and improving managerial practices to foster autonomy and collaboration. Skills development remains a key priority, requiring training to be further aligned with economic needs. Potential measures include expanded dual education in industrial fields, supporting access of vulnerable groups such as older and low-skilled workers, and strengthening fundamental education while reducing the impact of socio-economic background on performance.

Growth in unit labour costs in France has been among the lowest in Europe over the last decade, driven by large social security reductions and wage moderation, and reflecting stronger price competitiveness. However, current support measures could be reformed for greater efficiency, notably, by cutting social security reductions on intermediate wages where they have been ineffective and reallocating resources towards lower production taxes and enhanced skills development.