Controversy over new return-to-work measure

In October 2008, the French parliament adopted a bill extending nationally a new form of social welfare known as ‘active solidarity income’. This new benefit will make it possible to combine guaranteed minimum income with paid work. However, its funding has led to controversy and criticisms have also been made regarding its discriminatory nature. Trade unions argue that the new income benefit will encourage the proliferation of low-paid jobs.

On 8 October 2008, the French parliament adopted a bill extending ‘active solidarity income’ (Revenu de solidarité active, RSA) at national level. This new form of social welfare had been introduced experimentally for a few months in some departments (départements). The bill provides for this new measure to replace certain existing minimum income guarantees, such as the ‘minimum integration income’ (Revenu minimum d’insertion, RMI) (FR0401103N) and lone parent benefit (Allocation de parent isolé, API) (FR0403105F, see also the French contribution to the Industrial relations developments in Europe 2006 report).

The main feature of RSA is that it changes the possibilities of combining the minimum income benefit with pay earned by unemployed people who return to work and who depend on these forms of financial help.

Main criticisms

Until 2008, combining guaranteed minimum income (RMI or API) and paid work has been possible for a period of a year. However, the new measure – RSA – extends indefinitely the possibility to combine minimum income guarantees and pay. It also provides for reducing, during the year following a return to employment, the financial advantages linked to returning to employment for beneficiaries who take up full-time employment and even for those who take up a job that is more than half-time.

It may be argued that the incentive to move from unemployment to employment tends to depend more on a fixed short-term measure (for a year) than on a hypothetical situation linked to reducing the financial advantages of the benefit, albeit over a longer period. Indeed, with this emphasis on – in effect – penalising the take-up of full-time employment, the new measure seems rather to encourage the development of part-time work and even marginal or ‘mini’ jobs with very few working hours.

This is one of the main criticisms that trade unions and non-governmental organisations (NGOs) have put forward against the new measure. Although RSA aims to combat the growing number of low-paid jobs, it actually may encourage their proliferation. As the new measure reduces the incentive to return to employment and subsidises low pay in a permanent way, it in fact makes this situation easier in the long term for employees and does not encourage employers to increase lower pay rates. RSA therefore runs the risk of locking employees in jobs that are not highly paid, in a situation known as the ‘low pay trap’.

Controversy over funding

The funding of RSA has also been controversial. Originally, the commission that advocated this measure in 2005 calculated that it would cost between €6 and €8 billion. In the spring of 2008, the High Commissioner for Active Solidarity, Martin Hirsch, who represents the government in relation to this project, reduced these ambitions significantly to about €3 billion; he even envisaged resigning if this target was not met. In the end, following budgetary arbitration before the vote on the law, the budget allocated to RSA has been set at €1.5 billion.

Moreover, the French President, Nicolas Sarkozy, decided that the funding should be covered by a new 1.1% tax on income from capital and property. This proposal led to criticisms from both right-wing and left-wing politicians. Some conservatives regretted the creation of a new tax, while the Socialist Party (Parti Socialiste, PS) condemned the idea that the most wealthy tax payers would be exempt from funding RSA – due to the ‘tax shield’ (bouclier fiscal). The centre-right government that was formed after the 2007 elections had indeed introduced a mechanism that puts a 50% ceiling on direct income tax.

Finally, another criticism of RSA concerns its discriminatory nature, which has been confirmed in a study (in French) published on 20 October 2008 by the High Authority for Combating Discrimination and Promoting Equality (Haute autorité de lutte contre les discriminations et pour l’égalité, HALDE).

Reactions of social partners

The social partners have said little on this issue. This can partly be explained by the fact that the actual implementation of the new measure, which is relatively technical, will depend on the decrees regarding implementation that will be adopted after the final vote on the law. The Movement of French Enterprises (Mouvement des entreprises de France, MEDEF) fully supports the aims of RSA, although it has some reservations about the way it is funded.

The National Secretary of the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), Annie Thomas, regrets that the discussions ‘focused on funding. The content of RSA and its implementation are what’s essential and will require mobilising everyone: companies, local authorities, social services and the state’.

Meanwhile, the National Secretary of the General Confederation of Labour (Confédération générale du travail, CGT), Maryse Dumas, emphasised that the implementation of RSA is subject to two conditions:

On the one hand, it is a matter of penalising companies that use insecure and part-time jobs. Reduced social contributions should thus depend on company employment and pay policies. On the other hand, it implies the implementation of social and economic policy that promotes employment and the quality of jobs.

Pierre Concialdi, Institute for Economic and Social Research (IRES)