Is the French model too generous? This is a question that will certainly animate the budget debate this autumn. Because the Social Security accounts are in the red.
In 2023, the various social security funds paid out 10.3 billion euros more than they collected. A deficit that is not a cyclical accident as the balances are regularly negative.
The quick conclusion from reading these figures may seem obvious: yes, the social model must be made less generous since it is partly financed by debt. However, the matter is much more complex.
The Covid-19 crisis has pushed the accounts into the red due to medical expenses related to the pandemic and the drop in revenue caused by the 2020 economic crisis.
The first element to highlight is the Covid-19 health crisis. It caused the accounts to plunge into the red due to medical expenses related to the pandemic and the drop in revenue caused by the economic crisis of 2020. Before the outbreak of the virus, the “social security hole” was being absorbed year after year and was approaching balance.
One could of course retort that this kind of crisis is probable, and that there will be others. But, on the one hand, such a shock does not happen every five years, and on the other hand, it is logical that the accounts plunge during a disaster: this is the principle of insurance, and Social Security is insurance against the risks of life.
“Okay, but insurance must then be in surplus when everything is going well, precisely to finance the hard knocks when they happen!”will retort the supporters of a reduction in social security spending. The reasoning is correct, and France has tried to respect it, but Emmanuel Macron has broken the balance that was being built. Explanations.
Faced with repeated deficits in the social security system, the expenditure related to it has been tightly controlled in recent years. Pension reform, tightening of unemployment insurance, less reimbursed medicines, public hospitals on a strict regime, parental leave maintained at a meager level… the French social model has become, in certain aspects, less generous.
These sacrifices have paid off financially, as shown by the improvement in accounts between 2010 and 2019. More recently, France has rapidly reduced post-Covid social deficits despite the medium-term consequences of the pandemic (delayed care, post-lockdown depression, etc.) and the accelerated ageing of its population.
In its 2023 report, the High Council for the Financing of Social Protection thus recalls that the pension reform of January 2023 alone, if it is maintained, will improve the accounts by 5.6 billion euros per year from 2027. In short, it is impossible to say that the French have not made an effort.
A hole in the recipes
In fact, the concern comes less from expenditure than from revenue. And this is where the President of the Republic comes into play. As a reminder, in 2022, the Social Security was financed at 54% by social contributions based on salaries, at 31% by earmarked taxes (CSG, CRDS, VAT fraction, etc.) and at 13% by public contributions from the State and local authorities. However, in recent years, Emmanuel Macron has weakened the main pillar, that of social contributions.
To support household purchasing power, the executive has indeed bet on one-off bonuses rather than sustainable wage increases. Value sharing bonus (better known as the Macron bonus), end of contributions on overtime, profit sharing, participation… all these exemptions from wage increases have been encouraged. Since 2019, these tax and regulatory incentives have worked: bonuses have increased significantly faster than wages.
The problem is that most of these systems are exempt from social security contributions. Of course, in theory, the State is supposed to provide compensatory systems since the Veil law of 25 July 1994. But in its latest report on the Social Security accounts, the Court of Auditors notes that the government has not provided any for the bonus for sharing the value.
Without the one-off bonus schemes, the social accounts would have generated a surplus of 11.5 billion in 2023!
More generally, the Court observes that the compensatory taxes imposed on companies when they use bonuses are becoming less and less strict and that, as a result, “Social Security only recovers barely more than a third of the shortfall it suffers due to exemptions on salary supplements”.
As a result, the bill is now very expensive. The shortfall for the Social Security linked to these measures thus amounted to 19.3 billion euros in 2023, according to the Court of Auditors. Without them, the social accounts would therefore have generated a surplus of 11.5 billion last year!
The situation in 2023 is not exceptional: since 2018, the Social Security accounts have been in the green every year, except in 2020, the year of Covid-19. In short, without the levies encouraged by Emmanuel Macron, the collective insurance against life risks that is Social Security would be perfectly functional, with normal years financing one-off claims.
The reduction in social security contributions on low wages and the budget devoted to the activity bonus have deprived the Social Security of 100 billion euros in revenue each year.
And that’s not all. Since the early 1990s, France has reduced social security contributions on low wages to combat unemployment among low-skilled people. A policy that has rather borne fruit in terms of employment, but which has dried up social security accounts.
In 2022, the amount of general reductions in employer social security contributions for the private sector thus amounted to 69.8 billion euros. To this sum can be added the budget dedicated to the activity bonus (9.8 billion euros in 2021). In short, in total, the Social Security would benefit from roughly 100 billion euros in additional revenue each year without the existence of the numerous exceptional schemes.
Empty coffers policy
For some heterodox economists, this development is not the result of chance but constitutes a textbook case of policy of the type “starve the beast” (in French, “starve the beast”). This strategy of empty coffers, implemented by Ronald Reagan in the United States in the early 1980s, consists of voluntarily reducing the revenue of public coffers, before denouncing the deficit, and reducing expenditure accordingly. Enough to reduce the social sphere and the public sphere, and leave more room for the private sector.
As the economist Michaël Zemmour recently recalled in our columns, “The government creates the conditions for a deficit to appear, and then it dramatises it to push an agenda of reforms, known from the start, which aim to reduce public spending”. An orientation which should be the subject of an intense war of words in a few weeks in the National Assembly.
Find our series “10 questions to understand the 2025 budget debate”
