Insee Analyses · November 2021 · n° 70

Flash estimate of the income poverty rate and inequality indicators Inequality and income poverty rates are expected to remain stable in 2020

After having increased in 2018, standard of living inequality and the income poverty rate fell in metropolitan France in 2019 [Guidevay and Guillaneuf, 2021]. The final poverty rate and the main standard of living inequality indicators for 2020 will only become available, on the basis of the enquête Revenus fiscaux et sociaux (Tax and Social Income survey) (sources and methods), during the course of 2022. In order to assess the poverty and inequality situation more quickly, in 2015, INSEE began producing annual flash income indicators based on a microsimulation method [Fontaine and Sicsic, 2015]. This method was retained, but also adapted to the unprecedented situation of 2020, which was marked by the health crisis. The increased number of assumptions and imputations required in order to simulate the peculiarities of that year (widespread use of partial activity, provision of exceptional support to low-income households and the self-employed) makes the results less robust than those for previous years (Box 1).

According to the microsimulation-based flash estimate method (sources and methods), standard of living inequality is expected to stagnate in 2020. The Gini index is expected to remain unchanged at 0.289 (Chart 1) following a fall of 0.009 in 2019. The ratio of the standards of living of the wealthiest 20% of people to those of the poorest 20% (S80/S20 ratio) is expected to remain at 4.4, following a fall of 0.1 in 2019. Finally, the D9/D1 interdecile ratio is also expected to remain at its 2019 level of 3.4.

The income poverty rate is expected to remain stable, at 14.6% of the population. The poverty threshold, which is set by agreement at 60% of the median standard of living, is expected to increase by 2.9% in current euros. In 2020, 9.3 million people are expected to experience income poverty.

The measures put in place to mitigate the impact of the health crisis, in particular the exceptional support provided to low-income households, are expected to contribute significantly to reducing income inequality and income poverty in 2020. The widespread use of the partial activity scheme, with its extended compensation arrangements, both limited job losses and partially or fully compensated for the loss of wages of those who retained their jobs but had their hours cut (Box 2). A significant drop was seen in the number of hours worked in 2020, largely as a result of the partial activity scheme, but also to a lesser extent due to job losses among the least qualified workers [Jauneau and Vidalenc, 2021].

Without compensation under the partial activity scheme, but taking account of the wage cuts associated with this, and in the absence of exceptional support for the self-employed and low-income households, the income poverty rate would have increased by 0.6 and the Gini index by 0.007 in 2020. However, this situation cannot be considered to be what would have happened had these measures not been put in place, as it is impossible to assess the extent of business failures and job losses that would otherwise have occurred.

Modelling (Box 2), shows that the extension of the partial working scheme is likely to have affected a total of 8.5 million employees in 2020, spread across the entire standard of living spectrum. However, those with an intermediate standard of living, between deciles three and nine, are the most likely to be affected by this scheme (Chart 2). Indeed, non-executive white-collar workers, blue-collar workers and intermediate professions, which were the groups most heavily affected by partial activity in 2020 [Jauneau et Vidalenc, 2020], are over-represented within these deciles.

There are fewer people in salaried employment among the 10% of people with the lowest standard of living than among those with the highest standards of living. In addition, of those who work, unstable career paths are heavily over-represented, with shorter durations of employment during the year. Since they spend less time in salaried employment during the year, those who are the least well-off would have been less likely to have benefited from the partial activity scheme. Above the seventh standard of living decile, the proportion of people experiencing partial unemployment is expected to decrease, as the proportion of managers, who were often able to continue working from home [Jauneau and Vidalenc, 2020], increases with standard of living.

As the compensation for partial activity is proportional to wages, the sums assumed by the public authorities and paid to employees experiencing partial unemployment increase with standard of living. In total, for all persons, whether or not they have been affected by the partial activity scheme, compensation for partial activity in 2020 is expected to account for just under 3% of standard of living on average (Chart 3). This proportion is expected to be slightly higher for people with an intermediate standard of living, positioned between the fourth and seventh deciles, as the scheme saw less use at the extreme ends of the standard of living scale. In total, wages and the compensation for partial activity are expected to reach almost 65% of the average standard of living, which is the same proportion as in 2019.

When compared with a theoretical situation for 2020 in which the compensation is not paid, but where the associated fall in wages remains the same, standard of living inequality would decrease: the Gini index would fall by 0.005. However, this counterfactual situation cannot be interpreted as what would have happened had the partial activity scheme not been implemented in order to mitigate the impact of the health crisis in 2020. Indeed, it is impossible to assess the extent to which jobs would have been lost had this scheme not been extended.

In order to compensate for the sharp drop in income experienced by self-employed workers as a result of the lockdowns and the ban on accessing certain shops and services, the public authorities established a number of support schemes for self-employed workers in 2020. These are simulated here for self-employed workers, excluding farmers, i.e. persons declaring industrial and commercial profits or non-commercial profits to the tax authorities. The support taken into consideration is the share of the Business Solidarity Fund (FSE) set aside for self-employed workers, the two schemes implemented by the Conseil de la protection sociale des travailleurs indépendants (Council for the social protection of self-employed workers, CPSTI): the “CPSTI RCI COVID-19” support package and the “CPSTI AFE COVID-19” support package, as well as the deferral and cancellation of contributions (Box 4). Indeed, although deferred contributions will need to be repaid in future years, standards of living are measured as a “snapshot”, i.e. without taking account of transfers in future years. The deferred contributions will therefore increase the standard of living of the self-employed workers who benefited from them in 2020, even though they represent future expenses.

According to the simulation, almost a third of self-employed workers are likely to have benefited from the FSE, receiving an average annual amount of EUR 2700 per person once the portion intended for their business expenses has been deducted. The higher the expected contributions, the greater the deferred contributions and therefore the greater the profit declared in 2019. Their amount therefore increases with standard of living. Finally, the two schemes set up by the CPSTI are expected to involve a smaller sum of money, distributed to 28% of self-employed workers, who will receive an average of EUR 1010 per year. Disregarding the deferred contributions, which are intended to be repaid at a later date, the schemes simulated here would cover an average of 90% of the business income lost by self-employed workers as a result of the health crisis. In total, when looked at across the population as a whole (whether they benefited or not), the support offered to self-employed workers is expected to represent an almost identical average amount for the poorest 90%. For the wealthiest 10%, the group that includes the highest number of self-employed workers, the amount of aid granted is expected to be twice as high on average per person. However, when compared with standard of living, this support is expected to present a much larger share for the poorest people (Chart 3).

The package of support measures for self-employed workers is expected to contribute very slightly to reducing inequality and income poverty, largely thanks to the FSE’s approach of targeting the self-employed workers experiencing the greatest downturns in business: the poverty rate and the Gini index are expected to decrease very slightly when compared with a counterfactual situation in which these support measures were not provided in 2020, but where income losses of the same magnitude were still observed. However, this is not the situation that would have arisen had support not been provided to self-employed workers: indeed, without these schemes, bankruptcies and loss of business would probably have been greater than what was observed in 2020.

In June and November 2020, EUR 150 were paid to each household in receipt of the revenu de solidarité active (active solidarity income, RSA) or the allocation de solidarité spécifique (special solidarity allowance, ASS). During those same two months, these households, together with those in receipt of housing benefits, received additional support of EUR 100 per child. In late August, households eligible for the allocation de rentrée scolaire (back-to-school allowance, ARS) received a bonus of EUR 100 per child. Finally, there were exceptional solidarity support measures aimed at non-students under the age of 25 in receipt of housing benefits: EUR 200 paid in June and EUR 150 paid in November. These exceptional support measures provided a total of EUR 2.2 billion, 80% of which was directed to the poorest 30% of people, amounting to an average annual sum of EUR 150 per person. Almost two thirds of the poorest 10% of people and one third of people falling into the second and third standard of living deciles benefited from this support. The lower the standard of living, the more support was received. As a proportion of standard of living, this support is expected to represent an average of 2.3% for those falling within the first decile, 1.0% for the following decile and 0.5% for the third (Chart 3).

As they are very much aimed at the persons with the lowest incomes, these exceptional household support measures are expected to reduce the income poverty rate by 0.5 and the Gini index by 0.002 when compared with a counterfactual situation in which this support was not paid in 2020.

Although the reduction in the number of hours worked is unevenly distributed across the population, the impact of the health crisis has been mitigated by the extension of the partial activity scheme. Thanks to this measure, the redistribution brought about by the usual socio-fiscal system is expected to be the same as in 2019.

If we disregard the exceptional measures, the usual social benefits and levies would have reduced inequality in standards of living before redistribution, , measured using the Gini index, to a similar extent in 2020 as in 2019. In 2020, levies are expected to reduce the standard of living of the wealthiest 10% of people by 29%, as was the case in 2019. Conversely, for the 20% of people just above the median, the reform of the income tax scale is expected to result in their standard of living being reduced to a slightly lesser extent than in 2019. Overall, however, levies are expected to lower inequality, as measured by the Gini index, by 38%, as was the case in 2019. The usual social benefits (family benefits, housing benefits, minimum social security benefits and the work bonus) are expected to represent a little over half of the standard of living of the poorest 10% of people, as was the case in 2019. Their share decreases as standard of living increases: for the 10% of people just above the median standard of living, benefits outside of the extraordinary measures implemented in 2020 are expected to account for 6% of their standard of living and less than 1% for the wealthiest 10% of people, as was the case in 2019. The usual social benefits are therefore expected to contribute to reducing inequality by 62%, as was the case in 2019. Although the number of RSA recipients increased by 5.6% between 2019 and 2020 [Ouvrir dans un nouvel ongletDrees, 2021a] primarily as a result of the low number of people leaving the scheme [Ouvrir dans un nouvel ongletDrees, 2021b], this increase did not bring about any significant change in the share of benefits as a whole in standard of living or their contribution to reducing inequality.

Therefore, although the usual transfers under the socio-fiscal system help to reduce inequality and income poverty, in 2020 as in previous years, they are only expected to account for a very small number of the changes that took place between 2019 and 2020 among non-student ordinary households. Indeed, the exceptional measures put in place to limit the effects of the health crisis have clearly taken over.

Monetary poverty and inequality indicators alone are not sufficient to shed light on all situations of poverty. That is why they are supplemented with non-monetary indicators based on living conditions and material and social deprivation [Legleye and al. , 2021; Blasco and Picard, 2021], or on difficulties experienced [Clerc and al. , 2021]. Original data have also been used to analyse the impact of the health crisis on those facing uncertainty in 2020, such as data from a panel of La Banque Postale customers [Bonnet and al. , 2021] or data on food aid distributed [Insee-Drees, 2021]. The monetary indicators drawn up on the basis of the enquête Revenus fiscaux et sociaux are also based on broad yet partial coverage, the characteristics of which are likely to have a greater impact on the assessment of poverty and inequality in 2020 than in previous years: ordinary households in metropolitan France whose income declared to the tax authorities is positive or zero and in which the reference person is not a student. When the coverage is extended to include the homeless, persons living in shared accommodation (hostels, medical-social establishments, university accommodation, etc.) or in mobile homes; to households where the reference person is a student; and to the overseas departments, according to INSEE’s estimates, the number of people experiencing income poverty is likely to be around 800,000 higher than the number usually published in 2018 [Sicsic, 2021]. However, it is possible that the health crisis will have had a more marked impact on some of the most vulnerable people, who are poorly captured by the enquête Revenus fiscaux et sociaux, as is suggested by the sharp rise in the volume of food aid distributed in 2020 or the surge in requests for specific one-off aid from students [ Echegu and al., 2021]. Finally, undeclared income, whether from legal or illegal activities, may have fallen sharply in 2020 with the restrictions on business and travel, which will have affected the situation of the persons who usually receive such income, although this cannot be taken into account here.