Les comptes de la protection sociale : historique et perspectives
Authors: Fonteneau Alain , Gubian Alain , Sterdyniak Henri , Verpeaux Christine 
Published: October 2008

The French Social Security : History and Forecasts A. Fonteneau, A. Gubian, H. Sterdyniak, C. Verpeaux The ratio of social security payments to GDP has expanded from 17 to 27 percent over the last twenty years. Three sub-periods can be distinguished. From 1968 to 1973, there was a rapid increase in social security benefits (6.7 % p. a.) and a similar increase in GDP. From 1973 to 1982 benefits kept on rising sharply (+ 6.4 % p. a.), but the growth of real GDP was much slower. Since 1982 the annual increase in benefits has decelerated (2.6 %). It has however remained higher than the growth of GDP. The waning of welfare policy began in 1983. The ratio of social security payments to GDP rose from 17.7 percent in 1968 to 18.3 in 1973, to 26.3 in 1982 and to 27.1 in 1986. The counterpart was a similar increase in social security contributions. From 1973 to 1982 employers' contributions rose as much as those of employees. From 1982, the rise in employers' payments has been lower than that of employees. Such a policy accounts for the high increase in the share of net wages in gross wage costs (40 % in 1986). Three medium-term projections of the Social Security were analysed. In the first scenario, there are neither new fiscal measures nor new cuts in social payments. From 1987 to 1992 the average annual growth of social security benefits would be lower than that recorded between 1981 and 1986. (2.7 % against 3.4 %). Because of the weak growth of GDP, the ratio of benefits to GDP would be 1.6 percentage points higher, and social contributions would rise slowly (0.8 % p. a.). The deficit would reach FF. 136 billion (i.e. 2.7 % of GDP). It would be about FF. 120 billion with an increase in wages of 2 percent per annum from 1989 to 1992 (second scenario). In order to eliminate such an automatic deficit, new measures are taken into account in the last projection. No particularly painful reform of the social security system is assumed, and the employers' contributions remain stable. Social benefits would then rise by 2.3 % p. a. The contributions on the retired, on the unemployed and on employees would be substantially raised. Further, the rate of contributions based on total income would reach 0.8 % in 1992. Postponing the retirement age is not desirable when unemployment is high. Indexing pensions to net wages would be fairer than making the retired bear the cost of the necessary adjustments. The development of pensions by capitalization seems difficult and liable to make the matter worse. Under present legislative provisions, the levy on the active population would increase dramatically (44 % from now on to 2020), although this would not necessarily prevent a rise in the purchasing power of the wage earners. The present system of family allowances looks insufficient. But it is not really unfair provided that it is supplemented by a guaranteed minimum income mechanism. As far as unemployment benefits are concerned, the Government should subsidize the creation and the maintenance of marginal jobs. The total budgetary cost would be negligible.