[en] Payroll taxes are usually designed to fund social insurance and not to contribute directly to redistribution. Over the last fifty years, France has modified dramatically the schedule of payroll taxation, turning it into the most progressive part of its tax system. Using administrative data and detailed microsimulation model of labor income taxation, we show that pretax wage (or labor cost) inequality measured by the P90/P10 ratio has increased by 15.4%, while net wage inequality has actually decreased by 18.9% over the 1967–2019 period. This reduction in wage inequality can be largely attributed to the policy mix of reductions of employer payroll taxes for low wage earners joined with minimum wage increases. We discuss whether this unusual French experiment carries lessons for other countries.
scite shows how a scientific paper has been cited by providing the context of the citation, a classification describing whether it supports, mentions, or contrasts the cited claim, and a label indicating in which section the citation was made.
Bibliography
Autor, D.H., Katz, L.F., Kearney, M.S., The polarization of the U.S. labor market. Am. Econ. Rev. 96:2 (2006), 189–194.
Autor, D.H., Katz, L.F., Kearney, M.S., Trends in U.S. wage inequality: Revising the revisionists. Rev. Econ. Stat. 90:2 (2008), 300–323.
Autor, D.H., Manning, A., Smith, C.L., The contribution of the minimum wage to US wage inequality over three decades: a reassessment. Am. Econ. J. Appl. Econ. 8:1 (2016), 58–99.
Azmat, G., Incidence, salience, and spillovers: The direct and indirect effects of tax credits on wages. Quant. Econ. 10:1 (2019), 239–273.
Bozio, A., Breda, T., Grenet, J., Guillouzouic, A., 2019. Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions?. Working paper.
Card, D., The effect of unions on wage inequality in the US labor market. ILR Rev. 54:2 (2001), 296–315.
Card, D., DiNardo, J.E., Skill-biased technological change and rising wage inequality: Some problems and puzzles. J. Labor Econ. 20:4 (2002), 733–783.
Charnoz, P., Coudin, E., Gaini, M., Changes in the French Wage Distribution 1976–2004 : Inequalities within and between Education and Experience Groups: CREST Working Papers 2011–23., 2011, Centre de Recherche en Economie et Statistique (CREST).
Charnoz, P., Coudin, E., Gaini, M., Une diminution des disparités salariales en France entre 1967 et 2009. Insee Références-Édition 2013, Emploi et salaires, 2013.
Crépon, B., Desplatz, R., Evaluation des effets des dispositifs d'allégements de charges sociales sur les bas salaires. Econ. Stat., 348, 2001.
Dustmann, C., Ludsteck, J., Schönberg, U., Revisiting the German wage structure. Q. J. Econ. 124:2 (2009), 843–881.
Farber, H.S., Herbst, D., Kuziemko, I., Naidu, S., Unions and inequality over the twentieth century: New evidence from survey data. Q. J. Econ. 136:3 (2021), 1325–1385.
Feenstra, R.C., Hanson, G.H., The impact of outsourcing and high-technology capital on wages: estimates for the United States, 1979–1990. Q. J. Econ. 114:3 (1999), 907–940.
Finkelstein, A., McQuillan, C., Zidar, O., Zwick, E., The health wedge and labor market inequality. Brook. Pap. Econ. Act., 2(1), 2023.
French, E., Lindner, A., D'Dea, C., Zawisza, T., 2022. Labor Supply and the Pension-Contribution Link. NBER Working Paper 30184.
Fullerton, D., Metcalf, G., Tax incidence. Auerbach, A., Feldstein, M., (eds.) Handbook of Public Economics, Vol. 4, 2002, Elsevier/North Holland.
Goos, M., Manning, A., Salomons, A., Job polarization in Europe. Am. Econ. Rev. 99:2 (2009), 58–63.
Gosling, A., Machin, S., Meghir, C., The changing distribution of male wages in the U.K. Rev. Econom. Stud. 67:4 (2000), 635–666.
Katz, L.F., Autor, D.H., Chapter 26 - Changes in the wage structure and earnings inequality. Ashenfelter, O.C., Card, D., (eds.) Handbook of Labor Economics, Vol. 3, Part A, 1999, Elsevier, 1463–1555.
Katz, L.F., Murphy, K.M., Changes in relative wages, 1963–1987: Supply and demand factors. Q. J. Econ. 107:1 (1992), 35–78.
Kramarz, F., Philippon, T., The impact of differential payroll tax subsidies on minimum wage employment. J. Public Econ. 82:1 (2001), 115–146.
Lee, D., Saez, E., Optimal minimum wage policy in competitive labor markets. J. Public Econ. 96:9–10 (2012), 739–749.
Michaels, G., Natraj, A., Van Reenen, J., Has ICT polarized skill demand? Evidence from eleven countries over twenty-five years. Rev. Econ. Stat. 96:1 (2014), 60–77.
Pierce, B., Compensation inequality. Q. J. Econ. 116:4 (2001), 1493–1525.
Rothstein, J., Is the EITC as good as an NIT? Conditional cash transfers and tax incidence. Am. Econ. J. Econ. Policy 2:1 (2010), 177–208.
Saez, E., Matsaganis, M., Tsakloglou, P., Earnings determination and taxes: Evidence from a cohort-based payroll tax reform in Greece. Q. J. Econ. 127:1 (2012), 493–533.
Saez, E., Schoefer, B., Seim, D., Payroll taxes, firm behavior, and rent sharing: Evidence from a Young workers’ tax cut in Sweden. Am. Econ. Rev. 109:5 (2019), 1717–1763.
Verdugo, G., The great compression of the French wage structure, 1969–2008. Labour Econ. 28 (2014), 131–144.
This website uses cookies to improve user experience. Read more
Save & Close
Accept all
Decline all
Show detailsHide details
Cookie declaration
About cookies
Strictly necessary
Performance
Strictly necessary cookies allow core website functionality such as user login and account management. The website cannot be used properly without strictly necessary cookies.
This cookie is used by Cookie-Script.com service to remember visitor cookie consent preferences. It is necessary for Cookie-Script.com cookie banner to work properly.
Performance cookies are used to see how visitors use the website, eg. analytics cookies. Those cookies cannot be used to directly identify a certain visitor.
Used to store the attribution information, the referrer initially used to visit the website
Cookies are small text files that are placed on your computer by websites that you visit. Websites use cookies to help users navigate efficiently and perform certain functions. Cookies that are required for the website to operate properly are allowed to be set without your permission. All other cookies need to be approved before they can be set in the browser.
You can change your consent to cookie usage at any time on our Privacy Policy page.
