France crowned European champions of social welfare spending

France spends more money on social welfare than any other European country, a new study has revealed and when it comes to poverty rates it's better off than the UK and other EU countries.

France crowned European champions of social welfare spending
Photo: AFP
“France is the champion of Europe, and probably of the world, when it comes to social welfare,” said Drees France's national research and statistics agency in a report published on Thursday.
The report revealed that the bulk of the country's social welfare spend goes on healthcare and caring for the elderly with these two areas accounting for 81 percent of the overall expenditure.

In 2016, France spent €714.5 billion on social welfare which represents 32.1 percent of the country's GDP compared to an average of 27.5 percent for the rest of the European Union. 

France is just ahead of Denmark and Finland in terms of its spending on social welfare. 
Of the benefits received by the French, 91 percent of them are paid by the French state while 9 percent are paid by private companies such as “mutuelles” which provide top-up health insurance. 

'A collective denial': Why are France's elderly treated so badly?Photo: AFP

After healthcare and old age, family benefits account for the biggest portion of social welfare expenditure at 8 percent, followed by unemployment benefits at 6 percent. 
Meanwhile, the money spent on fighting poverty is far lower, Drees said in the report. 
The benefits that play a direct role in the “fight against poverty and social exclusion” account for 3 percent of France's social welfare spending. 
“In the fight against poverty, we are a generous country, but there isn't much of a difference between us and other European countries,” Jean-Marc Aubert from Drees told the French press.
All you need to know about the unemployment benefits you can claim in France Photo: AFP
Drees estimated that the areas of welfare directly targeted at fighting poverty, such as the revenu de solidarité active (RSA), the social welfare aimed at helping those on low wages, adult disability allowance and the tax breaks for the poor, cost the government €40.5 billion in 2016. 
The agency says that this amount has gone up by an average of 3.5 percent a year for the past ten years. 
When this is extended to include family benefits given to poor households and housing benefits for the poor, the expenditure is estimated at €57 billion euros or 2.6 percent of GDP.
French President Emmanuel Macron recently lamented “the crazy amounts of dough” the French state spends on social security, saying that “poor people stay poor”.
However given the poverty rate – the portion of people living on less than €1,000 a month – in France was estimated at 13.6 percent in 2016, the country is doing a better job at fighting poverty than Sweden, Germany and UK where the rate is 16 percent and Spain, where that figure increases again to 22 percent. 

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France’s pension system: How it works and what does Macron want to change?

French labour unions have vowed a wave of strikes against a pension overhaul promised by President Emmanuel Macron, a centrepiece of his drive to reform vast swathes of the economy.

France's pension system: How it works and what does Macron want to change?

Previous governments had already increased the number of years of work required to receive a full pension, but Macron's reform would replace dozens of separate systems with a single and entirely new regime.

Macron says the current system is too complicated and discourages labour mobility, and could be facing a deficit of 17 billion euros ($19 billion) by 2025 if nothing is done.

The government is to unveil details of the plan next week, but here are some of main elements that have been presented to union leaders during negotiations in recent weeks.

How does it work now?

France's current system is one of the most generous in the world, with private-sector employees eligible for pensions based on their 25 best years of salary — in the public sector, pensions are based on their last six months of salary.

On average, pensions are 75 percent of workers' pre-retirement earnings, compared with an OECD average of 58 percent. It is a defined contribution system, meaning pensioners get a guaranteed amount based on their earnings over their careers.

People born in 1973 or later must work a total of 172 quarters, or 43 years, for a full pension.

The official retirement age is 62, but people who quit without enough quarters will see their pensions reduced.

On top of the main system is a compulsory top-up regime that uses a points-based scheme, where points are accumulated based on salary and converted into pension payouts at retirement.

However there are also 42 “special regimes” for a range of workers including civil servants, dockers, lawyers, and employees of state rail operator SNCF and the Paris public transport operator RATP.

They provide for earlier retirement and more advantageous pensions originally offered as compensation for arduous work.

As a result, the average French person retires at 60, three years earlier than elsewhere in Europe, and four years before the average for wealthy nations in the OECD.

Public spending on pensions represents 14 percent of GDP — only Greece and Italy spend a higher proportion in Europe.

What would change?

During his 2017 presidential campaign Macron promised to implement a “universal” system that would do away with the special regimes.

A points-based system would be applied to everyone, which Macron said would ensure that “for each euro contributed, everyone gets the same pension rights.”

“We won't touch neither the retirement age, nor pension amounts,” he said in his campaign manifesto.

Yet the single system would allow for adjustments down the road which would enable the government to reduce deficits as the population ages and people live longer after retiring.

The government has vowed to implement the system gradually, so as not to impact older workers.

It has been negotiating with unions since August, but only the moderate CFDT, the largest private sector union, backs the idea of a single system — as long as the official retirement age of 62 is not touched.

The hard-line CGT and Force Ouvriere, more dominant among public-sector employees, has denounced a plan they say will effectively force millions of people to work longer or face curtailed benefits.