Industry Overview - The report focuses on the evolution of social contribution exemptions in France over the past 30 years, particularly targeting low-wage workers to address labor market challenges for less qualified employees [11][12] - The policy of reducing employer social contributions has significantly impacted employment, especially during periods of high unemployment in the 1990s [12] - The cost of the exemption system is estimated at 75 billion euros in 2023, driven by employment growth, wage mass, and the level of the minimum wage (Smic) [6] Historical Policy Evolution - The policy of reducing employer social contributions began in the 1990s with the "Balladur" exemptions, targeting wages close to the Smic [57] - Between 1996 and 2005, the policy shifted to degressive systems, aligning with the transition to a 35-hour workweek [60] - From 2006 to 2012, the "Fillon" exemptions stabilized, with a degressive linear system and a threshold at 1.6 times the Smic [69] - Between 2013 and 2019, competitiveness measures expanded exemptions to higher wage levels [56] - Since 2020, the system has stabilized, with thresholds and rates remaining unchanged [56] Labor Market Impact - The employment rate in France has improved since the 1990s, but inactivity and unemployment remain high for specific groups and less dynamic employment areas [6] - The policy has benefited employers of workers near the Smic, but short-term Smic increases expose companies to heterogeneous cost shocks [6] - The concentration of wages around 1.2 to 1.3 times the Smic has increased over time, particularly during the transition to the 35-hour workweek [6] Economic Analysis - Empirical evaluations indicate substantial employment effects for low-skilled jobs, both in France and abroad [7] - Recent studies show that exemptions benefit companies by reducing costs and improving liquidity, leading to broader employment effects beyond low-wage workers [39] - The progressivity of the tax system can discourage labor supply and training efforts, potentially reducing productivity gains [39] Reform Scenarios - The central reform scenario proposes reducing exemptions by 4.05 points at the Smic level and eliminating certain thresholds, aiming to lower the slope of exemptions and encourage wage progression [14] - Alternative scenarios include maintaining current exemptions at the Smic level but smoothing them to a lower threshold, potentially saving 12.1 billion euros but resulting in job losses [46] - Another option is to recycle savings from reducing the slope of exemptions, extending them to higher wage levels, which could create 50,000 full-time equivalent jobs [47] Simplification and Clarity - The report recommends simplifying the system by limiting it to two exemption regimes: a general regime and an enhanced regime for workers particularly sensitive to labor costs [16] - It suggests unifying the base for social contributions and exemptions, using the same base as the CSG (General Social Contribution) for activity income [16] - The report also proposes making social contributions more transparent by distinguishing between contributory and non-contributory levies [16]