President Macron has achieved a substantial institutional reform by allowing the social security scheme for self-employed workers (Régime social des indépendants, or RSI) to be absorbed within the social security’s general scheme. The transition between both systems is far from being complete, yet the campaign promise of redesigning self-employed workers’ social protection has been kept.
The project (the realization of which still needs to be specified) of extending these benefits, under certain conditions, to self-employed workers and resigning employees is also transforming unemployment benefits in depth. First options are nonetheless less voluntary than the candidate’s promises.
Facing the persistence of both poor housing and the migration crisis, the government engaged, quite suddenly, a significant reform of housing subsidies and of the French social housing (HLM) movement. Meanwhile, a “housing first” operation has also been announced, although nothing concrete has been achieved as of yet.
In terms of solidarity benefits, the campaign proposal to introduce a “unique social remittance” has sparked a few reports on the “unique social benefit” (ASU). Its implementation, which has not yet been made official, turns out to be highly complicated.
More precisely, with regards to poverty, an Interministerial Delegate for the Prevention and Fight against Childhood and Youth Poverty has been appointed, in order to organize a consultation and to later implement a clear set of targeted measures on childhood and youth poverty.
The upcoming pension reform is a gigantic project aiming to implement the rule according to which “every contributed euro gives the same rights”. A High Commissioner is in charge of this key point of the presidential agenda, with evolutions expected for 2019. However, the launch of this very complex reform has already been delayed on several occasions.
More generally, both announced and implemented reforms strive towards an increasing universalization of the social protection system. In line with this movement, tax revenues still come more from taxes than from contributions. This dynamic has triggered a few debates, but is part of a historical process.
11 september 2017
Unveiling of the 2018-2022 Five-Year Plan for Housing and against Homelessness
11 september 2017
Appointment of the High Commissioner for Pensions Reform
24 october 2017
Appointment of an inter-ministerial delegate to prevent and fight child and youth poverty
4 december 2017
Adoption of the 2018 Social Security Financing Bill
1 january 2018
1.7 point increase of the generalized social contribution (CSG) to offset the removal of unemployment and sickness contribution
Removal of the social security scheme for self-employed workers (RSI)
||The Social Security Financing Bill for 2018 stipulates the removal of the social security scheme for self-employed workers (RSI – régime social des indépendants) to progressively integrate the social protection of self-employed workers within the general scheme.
|Zero cost for public finances
The social security scheme for self-employed workers (RSI) was set up in 2006. The many difficulties this system generates have turned it into a marker of the distrust of self-employed workers. Its abolition on 1 January 2018 allows for the reintegration of the monitoring of the social protection of these workers within the general scheme.
The merger of these two schemes is not primarily intended to generate savings. The critical size of the new entities resulting from the merger with the URSSAF could nonetheless generate long-term management profits.
Removal of certain contributions on labor incomes, financed by an increase of the generalized social contribution (CSG)
||As part of the 2018 Social Security Financing Bill, the rate of the generalized social contribution (CSG) is raised by 1.7 points to 9.2% of all activity income, of capital and 8.3% on pension schemes for pensioners with an income above €14,404 for a single person or €22,906 for a couple. The measure came into effect on 1st January 2018.
This measure enables to finance the reduction of social security contributions on labor incomes, which translates into the removal of the employee health insurance contribution on 1st January 2018 and, in two steps, that of unemployment insurance. Measures are also planned for the self-employed workers.
|On a full year basis, neutral cost for public finances / +3.4 Md€ in 2018
|Additional revenues for the State:
|Additional revenues for local authorities:
|Additional revenues for social security:
|| €3.4 billion in 2018 / €0 on a full year basis
All of the measures introduced by the 2018 Social Security Financing Bill aim to shift some of the financing of social protection (sickness, family, unemployment) from employees to taxpayers in order to increase the net labor income, also by contributing other incomes from capital or replacement (pensions).
This shift translates into the elimination of part of the two-step employee contributions (unemployment and sickness for employees) and also a 1.7 point increase in the generalized social contribution (CSG) on most of the income.
All of these transfers involve more than €20 billion worth of social contributions in 2018. The figures provided by the government are consistent with our estimates.
It should nevertheless be noted that in 2018, the stagnation of the removal of the unemployment contribution of employees allows the State to have to redistribute only €9.4 billion (versus €13 billion) to the UNEDIC in a full year. This represents an additional revenue of €3.4 billion for the 2018 budget.
Lastly, a doubt remains regarding taking into account the respective dynamism of the different contribution bases and their impact on revenue levels.
Candidate Macron aimed to create a “generalized unemployment protection for all categories of workers” (including the self-employed) and to open up new rights for “resigning workers”.
Confronted with the malfunctions of the social regime for self-employed workers (RSI), candidate Macron committed to integrating the self-employed social protection within the general scheme, with a specific social security administration counter. Indeed, a special treatment and a specific level of social contributions will be needed to suit self-employed workers’ distinct needs.
Concerning housing, the candidate expressed his wish to recentralize housing aids by merging them.
Candidate Macron also promised he would create a “unique social remittance” for the most vulnerable by pooling the main social aids.
Regarding pensions, candidate Macron advocated for an easier pension scheme, and, to do so, wanted to spend a few years gathering the different existing regimes in order to gradually build a “universal pension scheme” (following the principle “every contributed euro gives the same rights to all”). In the long term, pensions should not depend on workers’ status but rather on their achieved work.
As announced, the social regime for self-employed workers (RSI) does not exist anymore. This legal change will progressively be aligned (over a 2-year transition period) with the general scheme from 1st January 2018 onwards. This will be accomplished, as promised, without self-employed workers’ contributions being aligned with that of employees. While the RSI might be removed institutionally, the complex transition process is still in progress.
Regarding unemployment, the reform first focused on contributions, with the complete removal of employees’ contributions expected on 1st October 2018 – after a first 2.40% to 0.95% decrease on 1st January 2018 – and the increase of the generalized social contribution (CSG) rate by a 1.7 compensation point (employers’ contributions remain unchanged). More structurally, promises to extend the system have been tempered to avoid potential financial abuses. While there will still be a compensation for self-employed workers, it will be quite limited. Regarding workers wishing to resign, the compensation will also be restricted to specific situations, as it is already the case today. While the National Professional Union for Employment in Industry and Trade (UNEDIC) and the unemployment insurance joint management were logically meant to be under the State’s control, social partners largely opposed this evolution.
Regarding housing, Emmanuel Macron announced in mid-September 2017 a “housing first” strategy. In July, during a speech he delivered on integration, he claimed: “by the end of the year, I don’t want to see any woman or man in the streets, in the woods or lost. It is a matter of dignity”. This “housing first” operation essentially presents a new strategy for the homeless. This strategy aims to prioritize an immediate access to stable housing instead of repeated transitory stays in hosting services. It is motivated first by an economic rationality, as it seeks to put an end to the continuous rise of housing credits. However, during Winter 2017-2018, spending related to emergency, integration and the hosting of asylum seekers had to be increased. Therefore, the “housing first” operation is for the moment only a mere statement, without any clear time-frame for implementation.
In addition, the government has announced, quite abruptly, a €5 decrease in housing allocations (APL). It then initiated a structural reform of these aids in order to both lower rents and public expenditure. Thus, within social housing, the implementation of the reduction of solidarity rent (RLS) must allow for paid rents to be adapted according to the situation of low-income households. The execution of such measures, which were highly debated, turns out to be very complicated in terms of management. These provisions are yet insufficient to shape a full housing policy reform. Yet, Emmanuel Macron’s claims have shown a clear determination to move forward on this matter.
Regarding the “unique social remittance”, the government first required expertise, along with works on unique social allowance, thus simplifying the solidarity benefits environment. Many complex issues are under discussion, such as the scope of fused benefits, the unique manager or the general economy of such a reform. If this reform were to be implemented at constant expenditure, it would necessarily disadvantage many people. In any case, nothing has been announced yet. Moreover, were something to occur, it would certainly be within the framework of the strategy of the fight against poverty that the government is intending to launch.
Given France’s blatant phobia of wealth, Emmanuel Macron has been labeled “President of the rich”. The President-Inspector of Finance, a sort of modern-day reversed Robin Hood, would be stealing from the poor to fund the wealthy. Highly exaggerated, this trait does not take into account the common wish to shake the social structure to its core, especially when it comes to poverty. Statements on this topic have generated fewer reactions (be they acerbic or impressed) than the endless debates on abolishing the wealth tax (ISF). However, the orientations put forward, as well as the nomination of an Interdepartmental Delegate to the prevention and fight against child poverty, are the symptoms of a renewed strategy. By focusing on child poverty, public action chooses the right target. Young beggars are not really concerned: they remain ignored by public authorities, which seem overwhelmed. The target is rather all the under-aged children living in low-income families. While the average poverty rate is 14% in France, it reaches 20% for children. 1 out of 5 children is considered as poor. The problem underlying this sad figure will not solve itself on its own. The next strategy against poverty requires structural inflections, which will hopefully emerge from the consultation engaged for a political renewal on tackling poverty.
Regarding pension reform – one of the President’s top priorities, despite it being not very well-documented – the government is preparing a systemic reform. In September 2017, in order to reach this goal, Emmanuel Macron appointed Jean-Paul Delevoye as High Commissioner for pension reform, a position attached to the Ministry of Health and Solidarity, and whose team is composed of a dozen high-level experts. The High Commissioner’s goal is to lead the necessary consultations and prepare a bill. The latter had been announced for the first semester of 2018, and was later delayed to 2019. It seems that this highly complex and sensitive case requires thorough negotiations. Implementing a concept as simple as “every euro contributed gives the same pension rights” demands the fundamental restructuring of the pensions scheme, as well as the fusion of its two levels (the standard level and the complementary one), the fusion of all the regimes and the revision of instruments used for contributions, but also solidarity.
It seems that we are moving towards an accentuation of the funding of social protection. After the reforms that have been engaged, the share of contributions, while it remains higher than that of tax, has decreased to below the 60% threshold. The transfer of part of employee contributions towards an increase of the generalized social contribution (CSG) will have been the key measure of the 2018 budget plan. Indeed, it managed to recreate purchasing power and helped the socio-fiscal system to recover its coherence. With the fulfillment of this campaign promise, Emmanuel Macron wanted employees to immediately recover their purchasing power, even if it involved letting pensioners or capital income beneficiaries pay more. More specifically, the CSG rate increased by more than 1.7 point by 1st January 2018. This rise will yield more than €20 billion in social security funds. The decrease of unemployment contributions (2.4%) and health contributions (0.75%) will be twofold: it will go down by 2.2 points by 1st January 2018, and by 0.95 point by September-October 2018.
The statements and reforms initiated by the elected candidate have 4 main characteristics:
- Voluntarism. In the coherence of what had been announced during the campaign and since the election, the projects launched are of significant scale.
- Necessary consultations. Traditional consultations can be useful in many domains. They are essential to pensions, and have been organized to this effect. They are also necessary in other fields, where they were previously found lacking (e.g. housing).
- Supporting the system’s universalization. Promised and announced measures (the latter being significantly less ambitious than the former) contribute to the social protection’s historic universalization, which includes the extension of its coverage and the fiscalization of resources.
- The financial constraint. If France manages to increase its savings, it is by reducing its social expenditure. Indeed, France is still the OECD country with the most social spending (31.5% of the GDP in 2016 vs. an average of 21% in OECD countries). Yet, it is hard to reform only to save money. In the context of deficit and indebtment, there is neither a social jackpot nor a fiscal jackpot. Proactive reforms remain the toughest to lead. Especially when it comes to simplifying (retirement, the struggle against poverty, merging the RSI with the general regime), because nothing is more complicated than simplifying.
Action regarding social protection is going in all directions. Rather than having to yield to the traditional claim for “a break”, which will undoubtedly arise at some point, major explanatory meetings must be organized. Some reforms are perfectly parametric and have even been slightly improvised (e.g. cuts in housing benefits). Others are structural, but are not progressing as fast as expected or necessary (e.g. the pension issue). It would certainly be relevant to improve the tempo and pedagogy of social policy reforms.
More specifically, the various senior committees in charge of the expertise and consultation on social protection (in terms of retirement, employment, family, health insurance) could – beyond their discussions and technical production – publish an annual update (as think tanks do) on the latest reforms.
In terms of communications, information on technical details ultimately matters very little, except for both experts and operators. Communicating on the general meaning of conducted reforms would be much more significant.