Inflation compensation, energy check, tariff shield … the government has multiplied the announcements in recent weeks to cope with the rise in the cost of living. In addition to these temporary measures, there are more lasting announcements such as the reduction in the housing tax for the wealthiest 20% of households, the allowance for disabled adults (AHH) or the employment contract for young people. In total, the budgetary cost of all these measures is estimated at 7.4 billion euros for the 2022 budget according to a study by economists from the Institute for Public Policy (IPP) and Cepremap (Center for Research economic and its applications) unveiled this Tuesday, November 16. “The average increase in disposable household income hides significant disparities” said the economist of the IPP, Brice Fabre, during a press briefing.
Purchasing power, a crucial question of the presidential election
For its part, the government has estimated this arsenal of devices at 6.93 billion knowing that there is still a vagueness on the income of engagement of young people. Even if the cost of the latter is estimated at 550 million euros, it could vary depending on the criteria selected. This explains much of the difference between the approach of economists and that of the executive.
In their last evaluation, the economists thus evaluated the redistributive impact of these perennial and temporary measures on the various categories of the population divided into percentiles. Five months before the presidential election, the question of purchasing power becomes particularly crucial as households will have to pay ever higher energy bills as winter approaches.
The measures of the 2022 budget mainly benefit the richest
President Macron will have a hard time shedding his label of “president of the rich” which has stuck to him since the start of his five-year term. Despite the very latest emergency announcements to tackle soaring prices, the big winners of all these budget decisions are expected to be households at the top of the pyramid. In their work, the PPI economists show that the largest increases in living standards in absolute terms primarily concern the highest percentiles of living standards. In contrast, households at the bottom of the scale register much lower earnings.
In a percentage approach to the standard of living, the gains appear more favorable for the most modest households. This difference is hardly surprising. Already, several economists had recalled on the occasion of the publication of the economic, social and financial report (RESF) annexed to the 2022 budget, that the presentation in absolute value or in% could lead to significant differences. The fact remains that the constrained expenditure linked to energy bills, subscriptions or transport generally weighs more heavily on the most modest households. In the context of soaring prices, families at the bottom of the scale are the most exposed.
Redistributive effects at the bottom and at the top of the pyramid
In the end, the redistributive effects of the aforementioned measures are mainly concentrated on the bottom and on the top of the social scale. The first percentile of the population thus benefits from a 3% increase in its standard of living. The gains keep decreasing until the 70th percentile, before increasing again for the last 30th percentiles. This change in earnings for the lower and middle classes is mainly explained by the flat-rate nature of the inflation allowance of 100 euros.
This envelope targets most people earning less than 2,000 euros per month. The percentage gain in standard of living for a person receiving RSA will be greater than for an employee close to this ceiling of 2,000 euros. On the other side of the spectrum, gains start to grow again from the bottom quartile due to the reduction in the housing tax for the remaining 20% of households. The housing tax for these categories had already started to fall in 2021 (-30%). This decrease should continue in 2022 (-65%) before the total exemption planned for 2023.
The 1% of the top of the pyramid, big winner of the five-year Macron
Unsurprisingly, the big winners of the five-year Macron are at the top of the pyramid. Economists explain that the richest 0.1% saw their standard of living jump 4.1% over the entire five-year term. The Top 1% recorded an increase of 2.8%. In contrast, the lowest 5% saw their standard of living decline over the period 2017-2022. “There is a general increase in the standard of living on almost the entire population of about 1.5% during the five-year term. On the first hundredths, there are irregular effects. For the last hundredth which corresponds to the category with the highest standard of living, the increase is about 2.8% “ said PPI economist Paul Dutronc-Postel.
While a large majority of French people are expected to see a rise in living standards during Macron’s tenure, inequalities could widen between the bottom and the top of the distribution. This gap could fuel the feeling of injustice that is already well established among part of the French population.