Insight: On welfare reform, French resistance

Reuters News
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Posted: Sep 21, 2011 4:03 AM
Insight: On welfare reform, French resistance

By Nicholas Vinocur

PARIS (Reuters) - In a cozy bachelor pad on the Paris Left Bank, Georges, a 26-year old would-be advertising executive, exhales cigarette smoke and describes how he games the French welfare system.

For up to four months every year -- the time required to become eligible for unemployment benefits -- Georges works as a waiter or bartender, earning 3-4,000 euros ($4,000-5,500) a month. Then he arranges to be laid off, amicably if possible. For the rest of the year he pockets unemployment benefits worth 54 percent of his pay and makes up the difference by working -- off the books -- in bars and restaurants.

"It's crazy," he says. "I have two arms, two legs, there's no reason I shouldn't be working. But the way the system is set up, there's just no incentive to do it all the time."

By at least one measure, France has the most generous welfare system in the world. The state spends more than 20 percent of GDP on social benefits a year, or more than 500 billion euros ($700 billion). Benefit fraud cost the country 20 billion euros in 2010, according to a bi-partisan parliamentary report in June. That is about two-thirds of the social security system's budget shortfall, which is expected to reach 30 billion euros in 2011. The social security deficit is a big part of France's public deficit, measured at 148.8 billion euros in 2010.

An August 2011 online poll by the Metro free paper showed 68 percent of French people want welfare beneficiaries to be tracked more closely. Now French politicians say it is time to get serious. In April, President Nicolas Sarkozy launched a campaign to go after welfare cheats. The government is drawing up a national register of all welfare recipients to make it easier to target people collecting benefits illegally. Some politicians have even suggested that people who collect a subsidy designed to help jobseekers find work known as the revenu de solidarite active (RSA) should be forced to make some sort of active contribution in return.

But true reform will be difficult. In France, rich and poor alike exploit opportunities for gain, even illegal ones. From bosses who dodge social fees to workers who want more paid holiday when it suits their schedule, it sometimes can seem as if the whole society is bending the rules. At the same time -- and despite the polls -- accusing people in public is widely seen as distasteful. Politicians may talk about a crackdown but they also know they cannot be seen to hurt the poor. Dominique Tian, a deputy in Sarkozy's center-right UMP party and one of the authors of the report on benefit fraud, goes as far as to call it a French taboo.

"Our country is less permissive than our neighbors to the south, but at the same time, we French are fond of our contradictions," says Jean Mallot, a socialist member of the parliamentary commission looking into ways of toughening defenses against fraud. "People scream and shout about what they see as criminal behavior, but are tolerant when it comes to the small things."

HOW TO CHEAT

Georges' lifestyle is one such small thing. The slender-built university dropout, who would give his first name only, lives rent-free thanks to the generosity of a relative. He gave up law studies three years ago to try his luck as a rapper, but found the lifestyle difficult to maintain while working full-time as a waiter at a chic Parisian cafe.

The solution -- unemployment -- was a no-brainer. "I wish I had figured it out sooner," he says, before pointing out that he has paid into the unemployment system.

Georges' off-the-books job should disqualify him from receiving jobless benefits. But he has not filed a tax return since he began working at 17. When his current benefits run out, he plans to apply for the RSA, which would entitle him to a free monthly transport card and aid for clothing, childcare, rent and skills training. Most of his friends, he says, live off a combination of RSA payments, illegal work, and other benefits.

He feels no pressure from the unemployment office to report his income, or to be entirely truthful about the status of his job search. Nor does he see any stigma in taking handouts. "On the contrary; it's the people working full-time for a crap salary who are the fools."

At a government jobs agency not far from Georges' flat, adviser Helene Thierry is not surprised when a reporter recounts Georges' story. Thierry has been helping people find jobs and paying out benefits since 2007, handling up to 200 cases at once, and says it is unusual for the often overworked advisers at her agency to check the finances of benefit recipients. When suspicions come up or a recipient fails to meet their obligations, penalties are "almost never" enforced.

"The workload is too big to follow up on every excuse, and even when you discover that someone has lied about this or that, you don't want to cut them off," Thierry says, adding that her colleagues share this view.

Thierry suspects that some 20 percent of job-seekers on her books are "delinquent" in some way. The biggest problem is people who miss their monthly meetings -- a good sign they are working without telling the agency.

Some well-to-do RSA beneficiaries treat the payment as an allowance, she says. "I once had a girl who came in yelling because we had cut off her RSAs," she says. "We had discovered somehow that she was living in a 300-sq-m flat and clearly wealthy. But she felt entitled to the RSA as pocket money. That's a common attitude: people feel the state owes them an allowance."

Georges, who has a different adviser, even hints at a degree of collusion with the woman who handles his benefits. "She even warned me against working for temp agencies, since they denounce you (to authorities)," he said.

PRIVATE CHECKS

In the absence of tough checks by public officials, employers are making more use of private inspectors. Franck Charpentier is the founder of Mediverif, a private inspection service hired by companies to check up on their staff. One familiar problem is the worker who calls in sick for a morning, then disappears for the whole of August -- the month when much of France goes on holiday. Calls and visits to their home go unanswered. At the end of August, they return to work saying they were too ill to answer the door or telephone, or check the post. "We have dozens of such cases every year," Charpentier said.

According to a study by Alma Consulting, French workers are absent an average of 17.8 days a year. That, says Charpentier, may be good for his own company, but it hurts the country. And he doesn't see things changing quickly.

"You'd think people would keep themselves in check, but we haven't seen any fall in the number of cases since we started to operate," he said.

"It's become a form of social dialogue: when there is a conflict at work, when an employee is unhappy, he calls in sick. People know that social security will not investigate their case immediately, if at all."

NO MONOPOLY ON CHEATING

Cheating the system is not exclusive to France, of course. Open a tabloid newspaper in most countries in Europe and there's a good chance you will find a story about a benefit cheat caught abusing the common good. Germany had "Florida Rolf," a man named and shamed in Bild newspaper for using benefits to fund a lifestyle of leisure in Miami. In Sweden, a woman took 2 million crowns ($300,000) from social security while illegally running two businesses. In Britain, the government funds sharply produced television spots with the slogan "It's not if we catch you, it's when."

But the French don't like to get personal. Newspapers write about general increases in fraud -- as with an April report showing a 19 percent jump in detected cases between 2009 and 2010 -- but stories that point the finger at individuals are rare. That instinct, according to Pierre Morange, a UMP member who heads the parliamentary benefit fraud commission, runs deep. For years there has been a longstanding refusal, running right through media and public life, to even admit such things happen. "Everyone denied it," he said.

Morange believes France's gentle approach stems partly from by the country's Catholic tradition, which blurs the line between charity and social security. Welfare beneficiaries are viewed as unfortunates in need of a helping hand, rather than temporarily unemployed workers, he says. Any acts of fraud, as sins go, are "venial" and thus excusable.

A 2010 study by Sciences Po sociologist Pierre Lascoumes, which examined attitudes toward fraud in 17 European countries, backs that view. Lascoumes showed that French people are among Europe's sternest when it comes to obeying the law but see practical situations differently. Asked whether it is acceptable to commit a "gentle" form of fraud, such as avoiding sales tax on services, French respondents were more tolerant than any other nationality.

"France occupies a unique position," Lascoumes concluded. "We are in a situation where principled positions appear rigid, ... giving way to transgressions in practice when faced with a concrete situation."

It's a different story in plain-speaking Protestant northern Europe where Swedish Finance Minister Anders Borg last year called on his countrymen to "stop drinking and get back to work." Jobs adviser Helene Thierry, who spent three months in Stockholm on a work exchange program at the Swedish jobs agency, has seen this tough love applied on the ground. While her Swedish counterparts were generous in handing out benefits, she said, job seekers who failed to check in regularly had their benefits cut. "There are no questions asked. In France we are much more lenient... It's a cultural difference."

RIGID RULE, SOFT PRACTICE

Morange believes things in France are "moving in the right direction." But seven years after he set up his parliamentary group, many of his initiatives are still snaking their way through the system. The problem is less a lack of laws, more the fact that they are not applied.

Two scathing reports published last year by France's national auditor listed the shortcomings: sluggish adoption of anti-fraud measures, failure to share best practices, failure to follow up on clear signs of fraudulent behavior, and a lack of communication, to name but a few.

Further undermining change is a lack of political consensus.

Jean Mallot, the socialist member of the committee, argues that benefit fraud amounts to a relatively small portion of the total. Companies that fail to declare workers and pay social fees are responsible for a much bigger portion of the problem, according to a 2010 report by France's national auditor.

Like other Socialist politicians, Mallot says the focus on fraud is a government tactic to cover up its failure to fix unemployment, which runs at nearly 25 percent for people aged 18-25.

"We should not be telling people that we're going to plug the deficit gap by fighting against welfare fraud," says Mallot. "By introducing ever stricter controls, we could maybe recuperate 2 or 3 billion euros at most. But it's unrealistic to say we would get back 10 or 20 billion - those are imaginary sums."

POLITICALLY, A FALLING KNIFE

While polls show two-thirds of French think the government should act, getting too tough can be fatal, as former Europe minister Laurent Wauquiez learned when he said in May that abuse of the welfare system had become a "cancer" in French society.

Wauquiez came in for a hailstorm of criticism from right and left, as politicians accused him of unfairly targeting France's poor. Sarkozy himself mused aloud whether Wauquiez should be fired from the government, according to three French news sources. He was given a new position as Secretary of State for European Affairs, a slight demotion, in a reshuffle.

At the same time, inaction can also hurt, as former presidential contender Lionel Jospin, a Socialist, found in 2002. "Jospin lost the election partly because he ignored abuse of the social protection system," said Marc Levy, a pollster at Harris Interactive. "Working class people found there was not enough of a gap between their salaries and aid for the unemployed."

That means politicians must find the line between being too generous and too tough. "You don't have to be a clairvoyant to see that without a fair reassessment of our welfare model, our country is headed for tensions, violence, bitterness, deepening of inequality and defiance of the public good," sociologist Jacques Etcheheguy wrote in the left-leaning weekly Marianne in 2007.

(Edited by Sara Ledwith and Simon Robinson)