In 2024-2025, productivity among French employees rebounded, while GDP continued to grow weakly and purchasing power surged in 2024 before falling back in 2025. The 2026 edition of its annual report, published in September 2025 by La Découverte, contains a file on the productivity rebound and puts forward a substantial quantitative explanation of the phenomenon. The report presents a file aimed at explaining the productivity rebound, while leaving part of the factors unexplained.
The essentials
- The productivity gain coexisted with weak growth and a marked increase in purchasing power in 2024, followed by stagnation expected in 2025-2026.
- OFCE primarily highlights job creation sustained by aid, apprenticeship and labor costs, with working time playing only a secondary role.
- OFCE maintains residual uncertainties but rules in favor of an explanation primarily linked to the exceptional employment dynamic.
- The remaining question is to identify the institutional reforms that would reconnect productivity gains to household incomes without degrading competitiveness.
An observatory at work for forty years
OFCE, the French Observatory of Economic Circumstances, has published an X-ray of the French economy each autumn since the 1980s. The exercise is well known. It is anticipated by business cycle analysts, ministerial offices, and economists who want a common factual basis before arguing over what policies to pursue.
The 2026 edition draws on INSEE data, national accounts, OECD comparisons, and short-term projections. It highlights the productivity rebound after the health crisis, its high employment content, and proposes an explanation of the factors at play.
OFCE is not a advocacy think tank. It is attached to Sciences Po. Its economists publish in peer-reviewed journals, work with public data, and adhere to a certain restraint in their prescriptions. This is precisely why this report is worth reading: when OFCE poses a question without answering it, that is because the answer is genuinely uncertain.
The central paradox: rising productivity, flat incomes
Here is the raw fact. In 2024 and 2025, productivity per employee in France posted a measurable rebound. An employee produced more per hour worked than in 2022 or 2023. In normal times, this signal is good: productivity is the only sustainable driver of living standards. It finances wage increases without feeding inflation, and it nourishes growth without additional debt.
Except this time, the aggregates projected by OFCE indicate a widening gap over 2025-2026: real disposable income per consumption unit would stagnate while real GDP per consumption unit would grow by around 1%. GDP growth has remained sluggish. Purchasing power rose sharply in 2024 and declined slightly in 2025. Business investment remained weak, but rebounded slightly in 2025. In 2025, the rise in value added for non-financial corporations was accompanied by an increase in compensation, while their gross operating surplus declined slightly.
OFCE primarily identifies apprenticeship, corporate aid, and labor costs as explanatory factors for the exceptional employment dynamic, with working time playing only a secondary role. These factors are not mutually exclusive and could weigh differently depending on sectors. The available data allow OFCE to identify a significant portion of the explanatory factors for the phenomenon. This is a rare form of intellectual honesty in a genre of publication that tends to produce neatly wrapped conclusions.
Three hypotheses, no certainty
On the question of business margins, the available data indicate a decline in margins in 2025, with productivity gains partially offset by wage costs and contributions. The national accounts published by INSEE show changes in the wage share of value added, but these aggregates mask considerable sectoral disparities. A small and medium-sized subcontractor in the automotive industry does not have the same margins as a CAC 40 player in a near-monopoly position in its market.
On productive investment, fiscal and budgetary uncertainty is documented as a possible brake on investment decisions. Productivity gains stemming from better work organization or partial adoption of digital tools do not necessarily trigger a new investment cycle. However, investment has increased slightly in 2025 rather than being frozen.
Olivier Garnier describes this bottleneck in his work on capital allocation in Europe: household savings are abundant, but they do not find their way into productive investment. Savings taxation, public guarantees, and conditions for access to credit are not playing their role as transmitter.
On social costs, France is aging and the ratio between active and inactive workers is deteriorating slowly but steadily. Spending on health, pensions, and long-term care weighs on social contributions and thus on labor costs. In 2025, the increase in employer contributions documented by INSEE stems primarily from regulatory changes to allowances and their basis. The financing of social protection is a levy, but the benefits distributed also support household income and consumption.
The limits of analytical neutrality
OFCE’s honesty has a cost. By refusing to settle the matter, the report leaves public decision-makers without a clear compass. If the problem is capture by margins, the answer lies in corporate taxation or labor law. If the problem is investment freeze, work must be done on financial architecture and reducing regulatory uncertainty. If the problem is absorption by social costs, long-term structural reforms must be tackled—pensions, health, long-term care—with an ambition that few recent governments have had the courage to maintain.
These three agendas are very different. They mobilize opposing political coalitions. And they cannot be pursued simultaneously with the same intensity without creating internal contradictions in economic policy.
OFCE’s analytical caution has its limits. A report that documents a paradox without arbitrating it is useful for research, but not very operational for a Finance Minister who must close a budget before November. The 2026 report rigorously frames the terms of the problem and leaves it to others to settle it.
Economists working on intelligent market regulation, such as Philippe Aghion on Schumpeterian growth, stress a point that the report touches on without developing: sectoral productivity is very unequally distributed. Sectors with high value added—digital, pharmaceutical, precision equipment—can experience significant gains while entire swaths of the service economy stagnate. The adoption of AI in large European companies, still highly concentrated as recent data show, reinforces this logic: productivity gains occur where tools are deployed, not uniformly across the economy.
If OFCE had disaggregated its productivity data by sector and company size with the same precision as it aggregates its national accounts, the work might have made it possible to discriminate between its three hypotheses. This disaggregation work exists elsewhere, in INSEE studies on multifactor productivity, in OECD notes on “frontier firms,” but it is not systematically mobilized in the report.
The international comparison
The 2026 edition draws on OECD comparisons to place France in context. And there, the picture is instructive. France is not alone in this situation. Germany experienced similar episodes of disconnection between productivity and incomes, notably in the 2000s, when the Hartz reforms had squeezed wages while increasing employment. Data on automation in Germany show that robots ultimately created skilled jobs, but at the cost of a decade of wage stagnation for low-skilled workers.
This German precedent argues for OFCE’s second hypothesis: investment freeze as the main factor. In Germany, what may have eventually restored the transmission of productivity to incomes was not a redistributive fiscal policy but a return of industrial investment, boosted by global demand and industrial champions capable of imposing their prices. France has industrial champions in certain sectors, but its small and medium-sized enterprise fabric is less export-oriented, less capitalized, less capable of absorbing demand shocks.
The liberal reading of the problem, the one defended for example by Jean Tirole on market regulation, points to another angle: insufficient competition in certain domestic markets allows companies in dominant positions to capture productivity gains without redistributing them, either in wages or in price cuts. If this is true, the solution is not in labor law but in competition law and market design. This is a real tension with OFCE’s third hypothesis, which points rather to collective social costs. The two readings are not incompatible, but they call for very different policies.
Interest of the report
The 2026 edition of The French Economy is worth reading for at least three reasons.
The first is factual. The report brings together the most recent French macro-economic data in a synthetic and rigorous format. For anyone who wants to understand where the French economy stands in 2025-2026—growth, employment, inflation, public finances, external position—this is the most complete and most accessible reference.
The second is methodological. OFCE models the effects of fiscal and monetary policies with econometric tools that remain rare in accessible French-language literature. Understanding how a fiscal multiplier works, how an increase in interest rates is transmitted to the real economy, how supply-side policy and aggregate demand interact: all of this can be read in the technical pages of the report, with French data.
The third reason is more political. The paradox that OFCE documents without resolving it is precisely the paradox that households live without articulating. They work more efficiently, they feel it, and yet their standard of living stagnates. This gap between performance and reward feeds a distrust that extends far beyond the economic sphere. The question of how public investment creates or destroys value is directly related: if productivity gains evaporate in poorly directed public spending, the spiral is hard to interrupt.
The report leaves open the question of institutional reforms that would make it possible to reconnect sectoral productivity gains to household incomes without compromising competitiveness or weakening social protection. No government, in the past ten years, has had both a clear agenda and sufficient time in office to address it. The report documents the scale of the problem without proposing a solution.
Bibliographic information - The French Economy 2026 - Author: OFCE (French Observatory of Economic Circumstances) - Publisher: La Découverte - Publication date: September 18, 2025 - ISBN: 9782348089312
Sources
- OFCE, The French Economy 2026, La Découverte, September 2025
- OFCE, publications and economic outlook notes (Sciences Po)
- INSEE, data on labor productivity and wages, national accounts
- OECD, comparative statistics on productivity and income distribution
