Cutting the cost of low-wage work: an evaluation of the 2018 French payroll reform

Abstract

This dissertation evaluates the 2018 French payroll reform through a quasi-experimental design. The reform intended to reduce labor costs through the elimination of employee health and unemployment contributions, although offset by a CSG increase, and the conversion of the CICE into a universal reduction in employer SSCs up to 1.6× the minimum wage. Using Synthetic Difference-in-Differences and relying on a balanced panel of the 38 OECD members from 2010 to 2022, the method constructs unit and time weights to more closely assess average treatment effects. The analysis finds that the reform achieves its proximate fiscal objective: total SSC receipts decline and the average employee SSC rate falls markedly, indicating a clear shift in statutory incidence. By contrast, estimated changes in employer SSCs are not statistically distinguishable from zero, and aggregate labor-market indicators such as unemployment, hours worked, and real wages do not exhibit significant changes. Although job-quality shows signs of improvement as a decline in the share of involuntary part-time jobs, but protection against individual dismissals ease. Macroeconomic aggregates (GDP per capita and private investment) show no significant effects at annual frequency. Taken together, the results suggest that broad payroll-tax relief primarily reassigns incidence and modestly improves job quality without triggering large, short-run aggregate adjustments. The findings imply that additional measures such as incentives for permanent-contract conversion or targeted policies may be required to translate cost relief into wider labor-market gains.