The French welfare state

...One such policy, which actually dates back to 1945, is to remove people from the labor force by lengthening the time of school, encouraging retirement of older workers, and inducing mothers not to work...

...About 9 percent of France is estimated to live in poverty, compared to 15 percent in the United States...

...Most of its beneficiaries do not appear to go directly into full-time employment afterward...

...Lower minimum wages risk reducing demand and triggering recession, with no guarantee that more jobs will be created...

...it redistributes money to sustain middle classes and to reduce poverty...

...Publicly defined (and financially assisted) rules for reducing the labor force at many companies create early retirement between fifty-five and sixty...

...One could argue that the deficit was useful and that France wouldn't have pulled (albeit haltingly) out of the recession without it...

...And while employers want to lower their social insurance contributions, they don't claim this to be a panacea...

...Despite cost-containing programs in recent years, there is still a very effective system of universal national health insurance...

...Companies use training programs and exemptions to get cheap labor and to put young workers on probation...

...The third lever on labor supply, paying women to stay home and raise children, was a feature of family policy after the war, but it was reduced from a universal to a means-tested benefit in 1971...

...Does this mean that being unemployed or poor in France is a different experience than elsewhere...

...It's only necessary to have worked four months out of the last eight, so young or marginal workers are often eligible...

...The initial goal was to provide basic social protection for working people, and ultimately all citizens...

...The RMI is phased out gradually for part-time workers, so they are not caught in a welfare trap...

...It has a cultural legitimacy and is accepted for both pragmatic and ethical reasons by many conservatives who believe it necessary for stability...

...WINTER • 1996 • 57 Politics Abroad This enduring strength of the social insurance system is an inertial rather than a dynamic strength...

...56 • DISSENT Politics Abroad The French Social Security system continues to provide the type of services most Europeans expect...

...The other main effect is to establish links between the long-term unemployed and a broad range of subsidized activities and training programs and social services...

...Pensioners, he promised, would share in economic growth...

...This helps explain why the National Front, blaming immigrants for unemployment, got more working-class votes than any other party in the 1995 presidential elections...

...His first government, under prime minister Alain Juppe, increased the value added tax to reduce the Social Security deficit and to substitute for a part of the Social Security contributions...

...By 1988 the risk of social exclusion among the long-term unemployed and other poor people had grown so high that the Rocard cabinet created a new social benefit, the revenu minimum d'insertion (RMI...

...Because the main benefits haven't changed drastically since 1982, it's easy to overlook how remarkable they are...

...France devotes about 30 percent of the total national output to social insurance alone (plus more on education...

...Important economists argue that the policies of prime ministers Rocard, Cresson, and Beregovoy were too rigorous in the early 1990s, contributing to a terrible recession...

...Mitterrand halted the Socialists' expansionary program in 1982 because of the fury directed by employers against pression fiscal—the combined total of Social Security contributions and direct taxes...

...Jospin would have expanded it further rather than increasing the regressive value added tax...

...The French are struggling to avoid the political abuses of the American antipoverty programs—the malignant stereotype of a welfare population, which is used as a scapegoat to distract the public from the real needs of working people...

...It could become that, but RMlistes are not yet an underclass...

...The amount of money is set low, at best a physiological minimum, but it is normally combined with family allowances and housing allowances...

...Mass unemployment remains and continues to pose a serious threat to the very existence of the welfare state...

...Jacques Delors (the favored candidate of the party until he withdrew in December 1994) was the high priest of zero inflation, in conflict with the expansionary instincts of most socialists...

...At that time, the Socialist cabinet announced that the work week would be reduced to 35 hours in stages...

...The result is a new stage in the lives of young people—an effective delay of their entry into adulthood...

...the demands of business come first...

...From one angle, the RMlistes compose a ghetto of those for whom the market has no use...

...By and large, the social treatment of unemployment amounts to a holding action...

...After the 1981 victories, the Socialist cabinet reduced the age of retirement with full pension to sixty...

...Those who say it is too expensive or obsolete avoid being specific...

...Most of the French believe that the real enemy is "exclusion," not just poverty...

...no changes were proposed that affected those who monopolize interesting work and chances for career advancement...

...The RMI only supplements earlier benefits...

...As of 1995, the basic family allowance for three children was about $300 a month—plus supplements for older children in special education, for back-to-school expenses, and for single parents...

...Today France has a higher unemployment rate-12.2 percent—than any other welfare state...

...Here, too, there are limits...

...Large numbers of people with jobs increasingly worry about the prospect of being without work A 1993 poll showed more people angry about unemployment than about homelessness, world hunger, or Bosnia...

...Pensions...

...One evaluation of its first three years concluded that 20 percent of the beneficiaries had obtained a secure job, while another 15 percent had found part-time or insecure work...

...Ideally, it would have eliminated the very need for public assistance...

...They are isolated, but most are childless, and one study in fact suggests that participation in RMI helped improve relations with their extended families (since they weren't always asking for money...

...and it dampens social conflict...

...The combined effect of all these social benefits is to raise some thirteen million people above the official poverty line...

...So far, the impact of RMI has been modest...

...A leading union, the Confederation francaise democratique de travail (CFDT), and leading ecologists argue for this approach, which has been effectively blocked since 1981...

...In the meantime, over a third of the unemployed have been seeking work for more than a year...

...The last recession created unprecedented deficits...

...Germany, the Netherlands, Belgium, and even Britain had some form of a guaranteed minimum income before France created the RMI...

...And there are limits to raising Social Security contributions...

...Nor is there any prospect that the modest economic growth that characterizes this stage of late capitalism can wipe out mass unemployment...

...The RMI is a payment to people over twenty-five, and women under twenty-five with children, whose incomes fall below the poverty level...

...Since 1982, socialists and conservatives alike have sought to mitigate unemployment through labor supply policies that were ingenious and extensive...

...Should unemployment insurance be abolished...

...The eventual candidate, Lionel Jospin, promised to temper rigor with expansion, but his platform was no more expansionary than that of Gaullist winner Jacques Chirac...

...Minimum wages, family allowances, and pensions were all raised significantly...

...RMI gives its recipients an income that won't compete with the market or market incentives...

...The issue of "Keynesianism in one country" was a thorny one for Socialists in the 1995 campaign...

...Over the years, France had created minimum incomes for other targeted groups—old people, handicapped adults, and isolated mothers...

...Family allowances are less extensive than they once were, but they still afford a sizeable boost to families with modest incomes...

...Persistent high unemployment threatens this...

...The originality of the RMI is not just its safety net function, but its "insertion" role...

...The government hastily backed down...

...All these combined with the social treatment of unemployment compensate for mass unemployment...

...RMI thus enables many of its recipients to escape poverty, and promotes real progress toward a basic welfare state goal, the guarantee of a minimum standard of civilized life for all citizens...

...Jean Gandois, who was elected president of the Patronat in 1994, is a believer in negotiation...

...q 58 • DISSENT...

...Thus, reducing hours would accentuate the existing division within the dual labor market...

...But there was no head-on attack on social insurance in the 1995 election, and the means exist to keep it funded...

...between 1968 and 1975, Paris increased spending to keep employment up...

...We all know what the outcome was in a world in which the United States and other nations were raising interest rates: French Socialists abandoned the policy after two devaluations...

...This was a regressive (and absurd) way to sustain a national responsibility, but it gave the unions and the employers a stake in the system...

...The jobs generated, only twenty thousand to seventy thousand, weren't worth the political energy...

...There is an influential tendency within the Patronat, the principal voice for business, that recognizes the need for social peace and wishes to avoid polarization...

...The recipient is supposed to sign a contract with a social worker listing efforts he or she will make to get a job, get training, become more employable...

...This follows steps by earlier governments that aimed to shift funding of social benefits more to the national budget and is partly a consequence of the growth of the nonworking population and changes in the relation between work and benefits...

...However, the French welfare state still manages to fly on one wing...

...The financing system dates to the welfare state compromise of the 1940s, which left the wealthy with relatively low income taxes and Social Security funded by payroll taxes...

...The Rocard cabinet created a new income tax to cover some social spending and Balladur increased it...

...But the European Community insists that the total deficit must be reduced to 3 percent of gross domestic product by the century's end in order to proceed with establishing the European common currency...

...The number of RMlistes (beneficiaries of RMI) has grown steadily, from 335,000 in 1989 to nearly a million in the first half of 1995, including new entrants and those who haven't escaped...

...After the first cut, to 39 hours, the plan was abandoned...

...French life expectancy is slightly higher than Americans'—at two-thirds the cost, relative to GDP, for health care...

...No one seriously proposes reversing this because of the cost and because French women want full-time work...

...Whenever deficits arose, these contributions were raised...

...RMI, for example, could only be financed by the nation as a whole, and most people agree that family allowances should be a national responsibility...

...But adopting an antipoverty approach, even a sophisticated one, makes the welfare state more defensive...

...As a result, there has been a revolution in retirement...

...They are now accustomed to the eighthour day and thirty-nine-hour week and have all the flexibility they need to hire part-timers...

...The employers could foment a real crisis, but have been trying instead to work within the welfare state compromise, though shifting the balance of power further in their direction...

...In 1994, some 2.1 million people used these programs for at least part of the year...

...Half the recipients now get an amount that is comparable to French public assistance...

...Many long-term unemployed also qualify because benefits run as long as forty-five months if one is over age fifty and had worked twenty-seven out of the last thirtysix months...

...Instead, it has grown as it sought to reduce and palliate the effects of the market...

...The founders of the welfare state saw full employment as one of its two main pillars: full employment would provide the revenue for social insurance, which in turn would enable workers to carry on after illness or accident, assuring them that in difficult circumstances their family's needs would be met.Yet France has now gone without full employment for almost as long as it had it...

...In spring 1994, there was an explosion of public anger when the conservative Balladur cabinet proposed setting the wage for young workers at 80 percent of the minimum wage...

...France also devotes much energy to technical training for workers...

...it meets basic needs...

...Still, the welfare state is a second best for these conservatives...

...The main threat to the welfare state is unemployment...

...It lowers revenues and increases costs for both early retirement and unemployment insurance...

...Half of eighteen- to twenty-year olds are in school...

...Moreover, employers would bitterly contest any shorter hours at the same pay...

...Another bundle of policies for manipulating the labor supply is the "social treatment of unemployment...

...So RMI's aim is to assist people who are trying to be part of society...

...This is no minor issue—socialist followers of Jacques Delors argue that the common currency will protect the welfare state against currency speculation, which makes exporters cautious about expansion and diverts the gains obtained by growth...

...French unemployment reached 4 percent in 1975, 7 percent before Francois Mitterrand's election in 1981, and 10 percent in 1984...

...The idea seems mathematically obvious— divide a constant volume of work by more people...

...And RMI doesn't create jobs or economic growth...

...Yet unadmitted Keynesianism still is a necessary part of the welfare state, contributing to "fuller employment...

...This includes part-time subsidized jobs in local government and nonprofit services, apprenticeships, and subsidizing private-sector employment of school leavers and the long-term unemployed by exempting employers from Social Security contributions...

...In the presidential elections, Chirac described Social Security as a basic right and stated that there was no need to restrict the percentage of gross domestic product going to health care...

...The French example shows that we shouldn't give up too easily on the French welfare state...

...Beveridge was right: a welfare state works best when it has full employment...

...its cost is less than 1 percent of total social spending...

...it is more likely that the same amount of work will be done for poorer pay...

...pushing more into classrooms would be babysitting, not genuine career training...

...The Socialists, after their 1981 election victory, attempted briefly to reduce unemployment through demandside policies...

...The RMI tells us a lot about the health of the welfare state...

...One radical answer to mass unemployment is the reduction of the work week, combined with job sharing...

...Thus, virtually all RMlistes get health coverage and many receive housing subsidies...

...In doing so, however, it moves away from its original socialist purposes...

...But the Socialists learned their lesson too well...

...The first line of defense is unemployment insurance...

...The bad news is that benefits were slashed several times in the 1980s and 1990s...

...They guarantee modest comfort for most people over age sixty and are raised to keep pace with inflation...

...Even French conservatives know that expanding private health insurance will increase costs...

...The classic policy for achieving full employment was public creation of demand...

...The good news about French unemployment insurance is that most people get WINTER • 1996 • 55 Politics Abroad it...

...What is its condition today...

...the vast majority are out of the work force by age sixtytwo...

...Workers were also unhappy because "sharing" didn't seem to include positions of authority...

...For twenty years, knowledgeable observers have been predicting its demise...

...National pensions are also universal...

...No plan that I've seen pressed managers to share jobs with workers...

...France had no unemployment problem between 1948 and 1968...

...Production and service workers would have to do the sharing...

...France differs from other welfare states by how it raises the money...

...His constituents admit that high Social Security contributions are offset by relatively low direct wages, and that their total labor costs don't undermine their competitiveness...

...Expansionary policies in 1981 did work—at a very high price—and the Balladur cabinet got a small reduction in unemployment in 1994 in return for a budget deficit equal to 6 percent of gross domestic product (GDP...

...To encourage hiring, the government reduces labor costs for companies through exemption from Social Security contributions...

...It is capable of innovating, of responding to new problems...

...Is it moribund, or capable of showing new vitality...

...They recognize, however, that there are limits to free-market fantasies...

...In other words, what is different about being unemployed in France is that a social security system is in place...

...Social insurance stabilizes demand...

...A sober consideration of what welfare states have done and still do should alert us to the costs—and dangers— of their demise...

...But all of these efforts to affect the labor supply do little to induce companies to expand their work force...

...Public health insurance...

...France has now reached 54 • DISSENT Politics Abroad the limit of these efforts...

...The long-term unemployed alone make up more than 4 percent of the labor force...

...These benefits are important for sustaining the middle classes and they have a far greater effect on poverty than the RMI...

...It doesn't rig the market or extend the sphere of nonmarket life...

...The RMI is calculated for each family, to raise its income to a target that depends on the family's size...

...Lthe absence of radical reform, the other wing of the welfare state—social insurance—must singlehandedly meet people's needs and calm their fears...