France Directing Adjustment?

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Abstract
The Bismarckian welfare state in France is financed by social security contributions to an even greater degree than is true in Germany. During the oil‐price crises of the 1970s and early 1980s, job losses could be contained through an expansion of nationalized industries and subsidies to private firms. This changed with the end of dirigisme in industry after 1983. Thereafter, early retirement was expanded to absorb the massive job losses caused by industrial restructuring. Since rising non‐wage labour costs impeded job creation in the private services, the government has shifted part of the burden to a special income tax, whereas attempts by successive governments to reduce the generosity of welfare benefits were typically blocked by large‐scale public protests.