Trésor-Info - Publications de la direction générale du Trésor - Inequality

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.

Internal Migration: A Cornerstone of China’s Economic Model

2025-01-28T00:00:00+01:00

Since 1978, hundreds of millions of people in China have migrated from the countryside to cities, mainly in the east, fuelling the country’s remarkable industrial transition from an economy previously dominated by agriculture (see Chart). In 2023, 66% of the population lived in urban areas.

Rural-urban migration has been driven by a gradual easing of the hukou, a household registration system for Chinese citizens based on their place of origin and their status (agricultural or non-agricultural, or rural or urban). The hukou is often compared to an “internal passport”. Dating back to the Mao era, it was introduced to control population flows and encourage migration to areas needing workers, while preventing slums from forming on the outskirts of large cities.

The rapid growth of internal migration has bolstered the working-age population without a hukou corresponding to their actual situation (177 million people, or 22% of the working-age population). While internal migration is now allowed, migrant workers from rural areas seldom obtain hukou from the city in which they reside or access the entitlements that come with an urban hukou. Migrant workers also work mainly in flexible, low-skilled jobs paid at a lower rate than workers with an urban hukou. Migrant labour is cheap for employers who pay virtually no social security contributions for migrant workers. China’s two-tier labour market thereby contributes to wage moderation, maintaining China’s cost competitiveness.

Living in a city without an urban hukou restricts access to property ownership, although restrictions have been relaxed in recent years in response to the real estate crisis. More importantly, migrant workers are not eligible for healthcare, education or government pensions in the same way as other workers. Migrant workers therefore save at higher rates than the rest of the population and human capital accumulation is slower at the aggregate level.

There has been much talk of reforming the hukou system and restrictions have been eased gradually, mainly in small- and medium-sized cities which attract fewer migrant workers.

Unequal Access to Day Nurseries and Related Economic Issues

2023-01-26T00:00:00+01:00

Government policies for childcare for the under-threes are two-pronged: to support parents’ professional activity and to foster children’s development until they start nursery school (école maternelle). They encompass all postnatal leave arrangements, financial support to cover the cost of formal childcare with a child minder or in a day nursery (crèche), and the provision of a day nursery service.

In the first few months of a child’s life, care by the parents is the most beneficial, all the more so when it is provided by both parents. However, after the first year, formal childcare, particularly in a collective childcare, is preferable for the child, especially if they are from a disadvantaged background. In the long term, funding childcare places for young children enables them to develop their abilities and human capital in general, and helps reduce social inequalities.

The unequal day nursery offering throughout France sometimes hinders access to formal childcare and limits the parents’ ability to work, in particular in single-parent households. In addition, the net cost of formal childcare restricts its use by low-income households. Childcare by parents is mostly provided by mothers and it distances them from the labour market when it lasts too long. As a result, it exacerbates social and gender inequality.

Improved governance by defining a leader from among the many stakeholders is required in order to expand the day nursery childcare offering. In addition, bringing the net cost for childcare by a child minder, which is incidentally less costly for the public purse, more into line with that for childcare in a day nursery, as provided for by the 2023 Social Security Budget Act, would spur recourse to formal childcare by low-income households.