Sunday, October 1, 2023

Redistribution greatly reduces income inequality in France

Redistribution greatly reduces income inequality in France In this new school year marked by the purchasing power crisis and the search for solutions to it, an INSEE study published this Tuesday highlights the important role played by monetary and non-monetary transfers, through public services, in income. of French homes.

To do this, the authors (Jean-Marc Germain, Mathias André, Michaël Sicsic) took into account the impact of public services in terms of education, health, transportation, housing or retirement.

“This expanded redistribution contributes to a significant reduction in income inequalities,” they point out. In 2019, a quarter of the year’s net national income – or €500 billion – was redistributed between net contributors and beneficiaries. In the end, 57% of French people received more than they paid to the State. Among the poorest 15%, almost all (95%) were net beneficiaries.

The impact of age groups.

The effects of redistribution are enormous. While before the transfers, the richest 10% of households had an income 18 times that of the poorest 10%, the gap is only 1 to 3 after redistribution.

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According to the study, the reduction of inequalities occurs through two main channels: firstly, taxes, which according to the calculations of the three experts take away 72,530 euros per consumption unit (UC) from the richest households compared to 7,410 euros from the poorest households; then the level of transfers, which are estimated at 23,450 euros per UC for the most modest compared to 13,420 euros for the richest.

The three INSEE economists offer an in-depth analysis by age groups, by socio-professional categories and by people’s family situation. “Redistribution must be evaluated throughout the entire life cycle. At certain times, you may be a net contributor. But once you reach retirement age, most of the time you are a net beneficiary,” says Jean-Marc Germain.

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The study shows that 90% of couples, in which there is a person of at least 65 years old, receive more than what they pay to the State in retirement pensions and also health expenses. In more general terms, those over 60 years of age are the main beneficiaries of redistribution.

On the contrary, more than half of those under 60 years of age are net taxpayers. “The largest net contributors are people between 40 and 60 years old, with at least a bac+3 degree and who have had few or no children,” says Jean-Marc Germain. Among those between 50 and 59 years old, the proportion of net taxpayers even increases to 70%. For a simple reason: often, since they do not have dependent children or health problems, they benefit less from public benefits.

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The transfers also reduce income inequalities between residents of the Paris metropolitan area and those of other metropolises. The redistribution system, on the other hand, is “almost neutral” for both workers and employees, according to the authors.

Perception is sometimes more negative than reality. For example, “middle class families are among the net beneficiaries of the system. But that’s not necessarily how they feel. For them to perceive it this way, they must have confidence in the pension system and integrate the promotion of public services,” says Jean-Marc Germain. The deterioration of the opinion of the French regarding their public services certainly does not help to convince them.

In the study, public services are evaluated according to their cost, according to national accounting methods, without taking into account their quality or effectiveness.

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