Study finds inequality in France remained stable during economic crisis

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The French national institute of statistics and economic studies, INSEE, this week published its yearly report on the wealth and income of households in France. This latest study concerns 2015, and demonstrates that inequalities in living standards actually fell slightly in the seven-year period after the outbreak of the financial and economic crises. Romaric Godin reports.

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The latest annual report on household wealth and income in France, published by the country’s national institute of statistics and economic studies, INSEE, sounds as a warning against government tax reforms in favour of the wealthy and impending cutbacks in funding of the social welfare system.

For the study shows that France, unlike many of its European Union partners, has, between 2008 and 2015, largely contained wealth and income inequalities among the population despite the financial and subsequent economic crises.

The latest figures concern 2015, when the median standard of living was at 20,300 euros per year (representing 1,692 euros per month), a slight increase on 2014 in constant euros, but less than that recorded in 2008.

INSEE underlined that inequalities in living standards among the population remained largely stable in France between 2008 and 2015, which bucked a trend of deepening inequalities among most EU member states: the Gini index, which measures the level of inequality in the distribution of household income (the scale rises the higher inequality is), actually fell in France over this period, to the difference of Germany, Britain, Italy, Spain and Sweden. The same was true of wealth, which saw a slight fall in inequality, after a strong rise in inequality between 1998 and 2010.   

The proportion of the population living in poverty in France – a condition defined by INSEE as having less than 60% of the median income, and which related to 1,015 euros in 2015 – was 14.2%, representing 8.9 million people. That was a rise of 0.4% from 2013, and a higher rate than before the financial crisis, although it remains one of the lowest in Europe.

Almost one in two people (49%) registered as unemployed lived in poverty in 2015, while social and professional groups were unequally affected; among farmers the poverty rate was 24.7%, and among the self-employed it was 21.4%. Among the retired, meanwhile, 8.4% were found to be living in poverty.

The INSEE report on household income and wealth in France published on July 5th: scroll down to read (in French only). © Insee

The poverty rate among single-parent families rose by 5.3% between 1996 and 2015, while the number of single-parent families in France almost doubled over the same period.   

If the French social welfare system has not blocked the rise of income poverty, it has, to the difference of others in Europe, succeeded in preventing inequalities to grow during the financial and economic crisis, and to protect the retired. While it is incapable of reducing inequalities in living standards during periods of growth, the French welfare system has unquestionably demonstrated that it offers a protective cushion during crises.

That point is all the more relevant today as the French government prepares to cut back benefits as part of measures to reduce the public deficit. According to a report this week in financial and business daily Les Échos, a working panel of experts commissioned by the government to find public spending savings of around 30 billion euros is likely to present its report next week, when it is predicted that the health and education sectors, and the funding of state benefits for families, will be particularly targeted. It is speculated that they will advise on economies of 30 billion euros.

While the government repeats over and again that the “efficiency” of the social benefits system needs to be improved, the figures provided in INSEE’s study illustrate that the term is well open to interpretation: it is indeed efficient, as a system of protection, even though it might be costly.

In its study of household wealth and income in 2015, INSEE analysed the situation of the wealthiest 1% of the French population, and who are affected by the government’s recent abolition of a “solidarity” wealth tax known as the ISF, in favour of a tax on property assets. According to INSEE, the pre-tax income of the richest 1% is on average above 106,210 euros per year per person, the equivalent of a monthly 8,850 euros.   

Paris and the Geater Paris region is home to 42% of the richest 1%, (and home to 66% of the richest 0.01%, of whom 46% live within Paris). Unsurprisingly, INSEE reports that they are a group who receive “more frequent and greater income from their assets” than the rest of the population, a form of income that represents 25% of all income among the richest 1%.

Average yearly income from property assets for the wealthiest 1% is 199, 690 euros, while average yearly income from corporate dividend payments is 36,470 euros – which rises to 692,590 euros among the richest 0.01%.

INSEE calculates that the richest 0.1% account for around 25% of the value of all income tax payments. After tax deductions, they are on average 5.3% wealthier than the rest of the population. But this redistribution is under attack from the government’s policies of lowering taxes for the wealthiest 1%, and in turn the middle classes, which, combined with the future reduction in welfare payments, can only produce a widening of the inequality gap, contrary to the French economic and social model.

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  • The French version of this article can be found here.

 

 

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