PARIS – Since eliminating a wealth tax and imposing a flat tax on capital gains, French President Emmanuel Macron opponents have quite maliciously compared him to US President Donald Trump, who slashed taxes for the wealthiest Americans in December. Some of his harshest critics even refer to Macron as a “president for the rich.”
Nothing could be further from the truth. Viewed in full, Macron’s reform agenda offers a new and promising approach to tackling inequality and social immobility in France. And, at any rate, the United States and France are hardly comparable on these issues. Although income inequality has increased in France since 1990, it remains well below that of other developed countries.
Specifically, the ratio of the top 10% of the income distribution to the bottom 10% is five times higher in the US than in France (see graph). Moreover, at 13.6%, the French poverty rate is lower than that of Sweden (14.5%) and Germany (16.7%). And all three of these European countries have poverty rates far below that of the US.
Still, although France provides free education to all children from kindergarten through secondary school, social mobility remains low. Social origin is more positively correlated with educational outcomes in France than in any other OECD country. More than 20% of French children from blue-collar households drop out of school without any diploma, compared to just 7% for children of senior managers or executives.
France’s system of higher education is unique, owing to the deep divide between its universities and a few elite schools known as “grandes écoles.” The grandes écoles spend far more than the universities on each student and thus provide far better career training. Only 27.5% of students at universities gain a degree after three years, and 25-30% of graduates are unemployed a year after leaving school. But, more important, as of 2017, only 2.7% of students in the grandes écoles had parents from the lower end of the socioeconomic ladder, whereas 66% of university students did.
Macron, for his part, recognizes that this system will have to be transformed in order to tackle inequality and social immobility and to spur more inclusive growth over the long term. His reforms will place more emphasis than ever before on teaching basic skills – reading, language, numeracy – in primary school. And after September 2018, schools in poor neighbourhoods will have class sizes no larger than 12 students.
Macron’s government is also making big investments in tutoring programs and other measures to help children with learning difficulties and to allow for more homework to be done at school. And it is establishing a new system to facilitate the transition from secondary school to university.
Up to now, students have been placed in universities through a lottery system, which often fails to match students with the right school or discipline. But after Macron’s reforms are implemented, students’ school performance and preferred subjects will become the determining factors in university placement. The final exam, the baccalauréat, will focus on two major subjects, two minor subjects, and an oral exam, instead of covering 10-15 disparate topics. To reduce the failure rate at the bachelor-degree level, the reforms will also introduce university pre-requisites, rather than guaranteeing eligibility for all. All of this will align France more closely with countries such as Sweden and Germany, where unemployment is far lower.
Macron has parted ways with the “old left” on taxation. But, as his education agenda shows, that is because he is thinking about inequality in an entirely new way, one that seeks to reconcile growth and social mobility. Inequality must be tackled at the root, which means that it requires an ex-ante solution such as education, not strictly ex-post measures such as redistributive taxation. That is why Macron is placing such heavy emphasis on improving education at the lowest levels, and on easing the transition from school to the labour market.
Moreover, it is not as though a flat tax on capital gains will hinder social mobility or increase poverty. In fact, since Sweden adopted the same tax system in 1991, its average annual rate of productivity growth has increased by a factor of four.
Social mobility in France has not experienced any major change since 1991. By moving away from a system of universal eligibility at the university level to one that finds a more appropriate fit for all students after high school, France stands to benefit from more genuine equality and greater social mobility. Macron’s revolution is on the move.
Philippe Aghion is a professor at the Collège de France and at the London School of Economics, and a fellow of the Econometric Society and of the American Academy of Arts and Sciences. Benedicte Berner is a lecturer at Sciences Po in Paris, Chair of Civil Rights Defenders, and an associate at Harvard University’s Davis Center for Russian and Eurasian Studies.
By Philippe Aghion and Benedicte Berner
Project Syndicate, 2018.