Is our welfare system sacrificing its youth? The exploitation of national transfer accounts provides a rather negative answer to this question, even if social protection has not compensated for the relative deterioration of the situation of young people in terms of living standards or poverty. The authors of a note from France Stratégie show that if social expenditure for the elderly has increased sharply since 1979, this is essentially due to the increase in their share of the population. The increase in social protection expenditure from which they benefit on average as individuals has thus risen in a more comparable way to that of other age groups.

 

 

Uncrease in expenditure on older people, mainly due to their growing share of the population

The weight in GDP of social protection expenditure allocated to the elderly has increased significantly over the last thirty years, rising from 11 % to 17 % between 1979 and 2011. The share of GDP allocated to expenditure on social protection for young people has stagnated (including education): it rose from 8.8 % to 8.6 % over the same period. In terms of individual expenditure, the average expenditure in relation to GDP evolves in parallel for these two age groups (+15 % between 1979 and 2011). Nevertheless, the average expenditure enjoyed by an individual over 60 years of age is still 2.7 times higher than that enjoyed by an individual under 25 years of age. The increase in spending for the elderly is primarily due to the demographic factor: they represented 17 % of the French population in 1979 compared to 23 % today.

 

Between mass unemployment, relative weakness of their disposable income, worsening conditions of access to housing and fear of "systemic downgrading", the younger generations would be "sacrificed" in France more than elsewhere, or even structurally "mistreated "*. Does social protection disadvantage young people to the benefit of older people?

The weight of social protection expenditure increased from 23 % of GDP in 1979 to 31 % of GDP in 2011. This growth in expenditure was financed by an increase in levies on income from assets (from 27 % in 1979 to 37 % in 2011). The over-60s were also involved, with the drawdown rate rising from 10 1Q1T in 1979 to 20 1Q1T in 2011. The under-25 age group has also increased, but at a much lower rate.

 

Total social protection expenditure for the over-60s amounts to 17.2 % of GDP in 2011, twice as much as for the under-25s, including education expenditure. What is more, this expenditure has risen sharply over the last 30 years, while spending on young people has stagnated.

If a young person today receives far less in terms of social protection than an elderly person, this is nothing new or shocking a priori, since needs (health in particular) and redistribution logics are not the same.

On the other hand, the relative financial situation of young people has deteriorated. Their incomes have tended to decline compared to those of the over-60s (primary incomes, but also after taxes and social benefits). The evolution of the standard of living of the under-25s confirms this analysis: it has gone from 88 % of that of the over-60s in 2002 to 82 % in 2012. The poverty rate for under-25s was twice as high as that of over-60s in 1996, and is now two and a half times higher.

In view of the situation of the different age groups, both in terms of living standards and net contribution to the social protection system, it would appear difficult to make greater use of the younger and working age groups. A reduction in the net transfer received by the over-60s therefore appears necessary. This development is already underway as a result of the various pension reforms already carried out, and will probably have to be continued, otherwise the sustainability of our social protection system will result in an increased imbalance to the detriment of the youngest and working age groups.

Hippolyte d'Albis, Pierre-Yves Cusset and Julien Navaux have drawn up age profiles of public transfers received and compulsory levies paid by mobilising the national transfer accounts over the period 1979-2011. They thus show that if most of the increase in social expenditure over this period benefited the oldest, this is primarily attributable to demography, as the number of older people increased more than the number of younger people. Individual expenditure on social protection, on the other hand, has evolved in a more comparable way between age groups. Social expenditure in relation to GDP per capita (including education expenditure) thus increased by 10 points for those over 60 years of age (i.e. an increase of 15 %) and by 5 points for those under 25 years of age (i.e. +23 %) between 1979 and 2011. The ratio between individual expenditure for these age groups remains fairly stable due to very different starting levels. Finally, in terms of funding, the older age groups are being called upon to contribute more, particularly since the introduction of the CSG at the beginning of the 1990s. Their contribution rate** doubled between 1979 and 2011 to reach 20 %, while that of assets on which the bulk of the contribution effort is still based rose from 27 % to 37 %.

Net social protection transfers (i.e. the difference between the sums received and the sums withdrawn) are ten times greater for an individual over 60 than for a young person under 25. In a context where poverty now affects the under-25s 2.5 times more often than the over-60s, this imbalance raises not only the question of equity but also that of sustainability. Under these conditions, taking into account the living and poverty standards of the different age groups and relative levels, it seems difficult to reduce the net transfers to the youngest and working age individuals, which will call for a decrease in the net transfer perceived globally by the over-60s over the next ten years.

 

Read the full analysis note 

 

Ippolit of Albis, Paris School of Economics - CNRS ; 

Pierre-Yves Cusset, France Strategy, Society, Institutions and Social Policies Department ; 

Julien Navaux, Paris School of Economics

 

*In the words of Christian Saint-Etienne and Louis Chauvel, respectively.

**The tax rate here is the ratio between what individuals in an age group pay to finance social protection and a set made up of their "super-gross" labour income, capital income and the public cash transfers they receive.

(Source: France Sratégie - January 12, 2016)