The differences between the economic and social models of the US and France are considerable. Fiscal pressure is 48% of gross domestic product (GDP) in France and 28% in the US, with an essentially funded pension system in the US, essentially pay-as-you-go in France, where the weight of pensions in GDP exceeds 14%. Public spending on social protection in France (pensions, health insurance, unemployment insurance) weighs 32.2% of GDP, compared with 17% in the US. In short, a very protective state in France, and very little protection in the US.

This discrepancy between the generosity of social protection systems is reinforced by the great divergence between the US and France in terms of income sharing. In the US, since 2002, labor productivity has risen by 42%, while real wages per head have risen by only 18%: The share of wages in GDP has therefore fallen considerably. In France, by contrast, real wages per head have risen by 17% since 2002, and productivity per head by 12%: The share of wages in GDP has therefore increased.

The fact that social protection is much more generous in France than in the US, a generosity financed by a much higher tax burden, and that income sharing is much more favorable to wage earners in France than in the US, has important consequences for the level of inequality and poverty. The Gini index of income inequality is 0.39 in the US and 0.29 in France – a value of 1 indicates a totally unequal society, where a single individual monopolizes all income, while a value of 0 indicates a perfectly egalitarian society, where all individuals have the same income. The percentage of the population below the poverty line, with income below 60% of median income, is 25% in the US and 15% in France.

Taking risks

In terms of equity, the French model is clearly superior to the American model. But in an unequal society, with few public transfers to the poorest, individuals are led to invest in human capital, in education, to avoid poverty; they take more risks, for the same reasons; and work effort is higher than in a society with many generous safety nets.

The proportion of the US population with a university degree or equivalent is 44% in the US and 32% in France, reflecting the significant education bonuses in the US: Only tertiary graduates have benefited from a sharp rise in salary since 2019. The employment rate for 15-64 year-olds is 72% in the US and 68% in France; labor productivity has risen by 18% in the US since 2010, whereas it has only risen by 6% in France and has been falling there since 2019. This incentive to effort and growth can also be seen on the corporate side. R&D spending by US companies reaches 3.5% of GDP, compared with 2.2% for French companies; investment in new technologies amounts to 5.6% of GDP in the US, to 2.5% in France. This largely explains the gap between productivity gains in the two countries.

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