Trésor-Info - Publications de la direction générale du Trésor - Government-policies

The Economic Issues Surrounding Redistribution to Families

2025-02-27T00:00:00+01:00

Since its introduction in the 1930s, family policy has been resolutely directed towards childbirth goals by horizontal redistribution from childless households to those with children. The first major change took place in the 1970s with the start of vertical redistribution from wealthy families to low-income ones. Family policy expenditure now encompasses a large number of objectives, including support for early childhood and gender equality.

Family policy has adjusted itself to socio-demographic changes in recent decades, in particular the increase in women in the workforce and single-parent families.

Today, family policy has three main goals: contributing to offsetting family expenses, helping vulnerable families and ensuring a work-life balance. To achieve its targets, the policy comprises tax schemes (essentially income splitting, the quotient familial), universal or means-tested monetary allowances, increased welfare benefits depending on the age or number of children, and the provision of public childcare services.

The French welfare and tax system now focuses mainly on low-income families, single-parent families and large families for which the poverty rate is higher than for other families. Besides income levels and the number of children, the additional monetary benefits paid for having children depend on their age and birth order. Nevertheless, changes to welfare and tax transfers based on these criteria are not always commensurate with the increase in costs for families. In addition, the "layering" of schemes creates changes in the amount of means-tested benefits paid per child that are difficult to understand (see Chart).

Childcare options conducive to a work-life balance are thought to have a stronger impact on fertility rates than the monetary benefits under family policy.

Japan's Growth Drivers

2023-04-27T00:00:00+02:00

After a dazzling economic catch-up in the post-war years, Japan has been experiencing low growth levels since the noughties – which distinguish it within the OECD – despite the efforts of successive governments to generate fresh momentum. Although it posted the highest GDP per capita growth in the G7 until the end of the 1990s, Japan, together with Italy, is the country in which growth has fallen the most on average since then (see Chart).

Initially buttressed by a rapid rise in capital stock, Japan’s growth has only been sustained by the workforce and total factor productivity since 2010, and this leverage is now weakening. The population is ageing and declining, and hourly labour productivity is growing meekly, especially in SMEs which are predominant in the manufacturing base and are less productive than large enterprises. Too much investment is earmarked to offset capital depreciation – a sign that this factor is poorly allocated. Potential growth, which stood at around 4.0% in 1990, is now estimated at less than 0.5%.

“Abenomics”, which were unveiled in 2013, aimed to expand the workforce and improve working conditions but they were only partly successful. Subsequent governments have focused on investments for the future to boost supply and lastingly lift productivity, through the digital transformation and the low-carbon transition initiated as from 2020, followed by the plan promoting a “new capitalism” which was introduced in 2021 and puts priority on entrepreneurship and vocational training.

Japanese growth will continue to be hampered by demographic trends and this calls for continued support for the employment of older workers, immigration and the birth rate by means of bold structural reforms. Japan also has headroom for improving the allocation of capital and the rollout of new technologies, a sector with strong growth potential.