Thursday, September 29, 2016

CICE : we are still looking for what happened to the loot… – Obs

We suspected a little, but it’s official : the YEAR has been a poor reform. It has without doubt saved the small bankruptcy, which would be the least we can expect an injection in the accounts of the companies of $ 18 billion per year. But on the job, the “E” of CICE (tax Credit for competitiveness and employment), the result is weak.

Micro-effect on employment

The follow-up Committee, which presented on Thursday morning the report in the “France” Strategy, has studied the results of several works that he has prepared on the subject.

  • A team of Liepp at Sciences-Po Paris (Laboratory for interdisciplinary evaluation of public policies), driven by Clément Carbonnier, does not see any jobs created. You read that right : zero. [Read the report of the Liepp, PDF]
  • The laboratory Tepp-CNRS, Université Marne-la-Vallée (Labour, employment and public policies), directed by Yannick L’horty, found a slight impact he estimates that between 45.000 and is 115 000 jobs created, more than 80,000 on average. Suffice to say not much, if we report those jobs to the 20-billion-dumped per year (250.000 euros per job). [Read the report of TEPP, PDF]

Careful, the monitoring Committee has favoured the results of the least pessimistic, with one caveat, to take account of the other, considering it as “likely” a direct effect of the order of “50,000 to 100,000 jobs created or saved” over the period 2013-2014. He explains that his choice optimistic “takes into account the fact that this observed effect should be increased by the employment of enterprises at risk of bankruptcy, which would have been saved” (an impact which has not been measured, because they have access to the data on business failures of the Bank of France…). He points out finally the inevitable “uncertainties” in his assessment, so to say that there is a part of wet finger.

But even if this range is reasonable, it remains in a low level very disappointing : 200,000 to 400,000 euros per job created and per year.

by the way, for the picture to be complete, it would be necessary to calculate the economic impact of the financing of the CICE, that has not yet tried to do the follow-up Committee. This funding is especially spent by an increase in VAT, which inevitably has had a negative effect on consumption and on the health of the business. May be would it, then, that this funding has destroyed more jobs that the SIEC has created…

Effect blurred on wages

If the money of the SIEC is not party to the employment, where is it ? What has been the impact on the economy this YEAR, a key measure of the plan of competitiveness of the government, whose inspiration was Emmanuel Macron, then economic adviser to François Hollande ? The diving of the different research laboratories in the accounting of the companies really does not answer this question. Nothing went towards investment. Nothing to innovation, Research & Development. And according to the Liepp, nothing on exports (to the chagrin of the second “C” – CICE – competitiveness).

The money of the CICE a-t-he at least led to a rise in wages ? It is not even certain : the experts consulted do not agree on the subject.

The team of the Liepp is well known a positive effect on remuneration. But a study of the Dares, involving only the wages (excluding bonuses), finds no significant impact of the CICE. “This suggests that the SIEC has mainly affected the premiums…” infers Clément Carbonnier. The owners of companies, sitters, preferring to avoid increase wages in a sustainable manner.

As to the Tepp, he finds a slightly adverse impact on wages. It may be due to the creation of 80,000 jobs mentioned (pay less than the average). What is clear, in any case, it is that the gas plant SIEC has not benefited the purchasing power of employees.

If the money is not really gone on the job and not really more on wages, it has landed somewhere. To profits, for example. It is clear that the margins of the companies are restated in France. The gross operating surplus is increased from 30 to 32% of the added value, in a few years. The companies took the opportunity to deleverage, or distribute more dividends. According to Henderson Global Investors, the payment of dividends in France rose from 31.9 billion dollars in 2013 to $ 40 billion in 2016…

Oh, by the way, the law on the SIEC prohibited to fund with the SIEC, the “increase of the share of profits distributed”… But this provision seems to have remained a dead letter. The subject has not even been studied by different laboratories everything for the follow-up Committee of “France Strategy”. The study of the allocation of the increase in margins induced by the CICE will be later explained Jean Pisani-Ferry.

What happened ?

Remains a question : what has happened so that we would arrive at such a pitiful result ? “Either the companies have not considered the CICE as a reduction of expenses, or they are remained sitters, the more likely both”, says Sarah Guillou, who headed the team of the OFCE working on exports. His colleagues, Clément Carbonnier, and Yannick L’horty opinent : at least one point of agreement among economists who have worked on the folder.

La major part of the manna in the SIEC has gone to the cash flow of enterprises. There may also have been a diffusion effect by the price to others : “sub-contractors beneficiaries of the SIEC have been able to grant price reductions to customers non-beneficiaries : large enterprises have been able to recover some of the money”, the judge and the economist Philippe Askenazy, a member of the monitoring Committee. In 2013, we had spotted the phenomenon, then dubbed the effect “racket”.

gas works

These results, as meagre as hardly legible, include the complexity of the gas plant, imagined in 2012. Rather than simply reduce the social security contributions, the government has preferred to pass through a tax credit, representing 6% of salaries less than 2.5 times the French minimum wage, and paid, at best, a year later (except to ask for an advance to the public investment Bank, which is possible).

Why this complicated system ? Because the government has sought to accelerate the announcement – it was the idea of “shock” – while delaying the payment of the cheque and, therefore, the impact on the public accounts. Hoping that the “shock” could result in behavior that is more aggressive companies in terms of investment and employment.

It is the reverse that has happened. Alexander, boss of a SME, paris, the producer of digital content, remembers :

“at the time, the message was very garbled. They have removed the relief Sarkozy overtime, which has increased our expenses, while promising the tax credit weird… They preferred to wait.”

Many economists had predicted at the outset a waste of public money. “The perfect example of what not to do”, to be contrasted and Thomas Piketty in his chronicle of the “Liberation” of 19 November 2012. The unions, for their part, had regretted that there was no consideration required in terms of jobs. Others were amazed that this aid, intended to help the competitiveness, and hence exports, is directed toward all groups, including to The Post office and Carrefour. As of 2014, it was clear that the SIEC does not work. François Hollande had made a reason, announcing in November the end of the device and its replacement by lower expenses from 2017.


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