2024-10-26 07:00:00
In the current debates around deficit reduction, the reduction in social security contribution exemptions granted to employers occupies a central place, and for good reason: this system will represent an effort of nearly 80 billion euros in 2024. This is more than the budget devoted to national education.
Although the reform proposed in the Social Security financing bill (PLFSS) aims to achieve a dual objective – to make savings and improve salary mobility – the current proposal is poorly calibrated and presents an unnecessary risk for the job.
In the 1990s and 2000s, exemptions from employer contributions attenuated the increase in labor costs caused by increases in the minimum wage and the move to the 35-hour week. They were strongly concentrated around the minimum wage level, where the cost of labor had the most direct impact on employment, particularly for low-skilled workers.
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In 2012, with the introduction of the tax credit for competitiveness and employment (CICE) and the responsibility pact, the exemptions were extended, reducing employer contributions to almost zero for minimum wage jobs and extending its benefits with salaries up to 3.5 times the minimum wage. As a result, the cost of these exemptions has doubled in a decade.
Several limits
At the same time, successive governments have introduced financial aid for people who work close to the minimum wage so that employment pays more than non-employment. First in the form of a tax credit (the employment bonus), then supplemented at the end of 2008 by the activity RSA, and all replaced in 2015 by the activity bonus, reinforced in 2019 .
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This bonus, which depends on the level of income and family situation, helps to partially compensate for the loss of various allowances when the salary increases. It now represents nearly 250 euros for a single person without children working full time on the minimum wage. But beyond the minimum wage, it decreases rapidly and disappears around 1.4 times the minimum wage. Its cost is now around 11 billion.
This massively redistributive system has enabled the creation of hundreds of thousands of jobs, thus contributing to the decline in unemployment, while reducing working poverty.
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But it suffers from several limitations. In addition to having become extremely expensive, the effects on employment are probably negligible beyond twice the minimum wage, the level at which the cost of labor is no longer a barrier to job creation. This system also induces very high marginal tax rates above the minimum wage, likely to slow down wage mobility. When wages increase, not only does the employer contribution rate increase rapidly, but the activity bonus decreases at the same time.
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