Spiraling costs of social welfare programmes strain France's budget

Spiralling costs of cradle-to-grave services are straining the nation's ability to raise enough taxes to pay for expectations of French

PUBLISHED : Friday, 08 November, 2013, 7:35pm
UPDATED : Saturday, 09 November, 2013, 3:41am


Patrick Jouve, the owner of a game store on the Rue Louis Braille here, assails the government regulations that limit the size of the bright chess set and bouncing balls he has painted on his storefront. If the painting covers more than 11 metres, it constitutes advertising and he has to pay a fee of US$1,350.

At 57, Jouve, is, however, looking forward to the generous government pension that will help pay for his planned retirement in the countryside at 62.

Down the street, Virginie Chargros, a baker's wife, depends on the US$404 monthly "family subsidy" she gets from the government to help raise the couple's three children. She and her husband work six days a week and bring in about US$2,200 a month, but without the subsidy they would have trouble providing the family with some "small pleasures", she said.

The pervasive presence of government in French life, from workplace rules to health and education benefits, is the subject of a great debate as the nation grapples with whether it can sustain the post-second world war model of social democracy.

The spiralling costs of cradle-to-grave social welfare programmes have all but exhausted the French government's ability to raise the taxes necessary to pay for it all, creating growing political problems for President Francois Hollande, a Socialist.

The nation's capability to compete globally is being called into question, and investors are shying away from layers of government regulation and high taxes.

But on the streets of this midsize city 500 kilometres southeast of Paris, the discussion is not abstract or even overtly political. Conversations here bring to life how many people, almost unconsciously, tailor their education, work habits and aspirations to benefits they see as intrinsic elements of their lives.

"You cannot take away guns from Americans, and in the same way you cannot take away social benefits from French people," said Louis Paris, who lives on the Rue Louis Braille, a typical neighborhood in St Etienne, which has deep working-class roots and historically has leaned Socialist. "They won't stand for it," said Paris.

In France, most child care and higher education are paid for by the government and are universally available, as is health care, three of the most costly elements in budgets of most US families.

The cost of health care in France is embedded in the taxes imposed on workers and employers; workers make mandatory contributions worth about 10 per cent of their paycheck to cover health insurance and a total of about 22 per cent to pay for all their benefits.

The payroll tax for employers can amount to as much as 48 per cent, meaning that for an employee paid US$1,000 a month, the cost to the employer would be $1,480, according to French government figures.

For that, the employee gets up to two years of government-paid unemployment insurance. Parents get a monthly payment for each child after the first, starting at US$176 for their second child, and most salaried workers need to take five weeks of vacation, although professionals and those who own businesses take less.

Hollande is facing stiff opposition for a proposal that would require people to work 18 months longer before qualifying for retirement benefits.

The tension, however, is playing out in individual lives. Sarah Revet, 31, was able to go back to work in a local government office after having children because of a public programme that allowed her get a degree that she could use to work in local government.

She also had government-subsidised preschool for her three-year-old and received the government's family payments, which have helped her to afford a babysitter for her one-year-old.

But when she was laid off because of budget cuts, she did not qualify for unemployment benefits because her job had been only part-time.

Yet she still believes in a government system that ensures the poor, especially, have an ample safety net. "I would absolutely make the choice to continue this," she said.