An economic analysis team set up by the prime minister’s office has published two new papers to determine how well off French households really are, especially for housing and travel.
Overall, the papers found that while people in Paris have the highest income, they also have the highest costs, and are not necessarily more materially well-off, despite earning more on average than the rest of the country.
Major questions tackled in the papers include:
- How does the level of household spending vary nationwide?
- How do different geographic housing areas affect people’s travel spend?
- And finally, how does this affect people’s level of financial comfort?
The two new papers come from the team France Stratégie, an institution attached to the prime minister’s office*.
They include analysis on how transport and housing expenses vary according to the size of an urban area, and the location of households within that area (e.g. centre versus periphery).
It found that on average, there are large differences in expenditure from one location to another.
For example, on the outskirts of large urban areas, the combined expenditure on transport and housing is 15% higher than in the centres of medium-sized urban areas.
However, it found that this was not due to major price differences across different areas.
Rather, it found that average expenditures are different primarily because the households living in these areas vary significantly in income.
Among households with a given level of resources and family set-up, the level of cumulative expenditure on transport and housing was in fact more or less the same, regardless of location.
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Households adaptable
This does not mean that prices are the same everywhere but it showed that households simply adapt to differences.
They compensate for higher housing prices by moving to smaller homes, and balance housing and transport expenditure so they trade off against each other.
Overall, taking into account resources and family set-up, households tend to spend fairly comparable amounts on transport and housing, from one area to another.
The differences in spending from one area to another simply reflect differences in average income, the report found.
The only exception to this rule is the Paris region, where, because of the level of rents and property prices, the same household will have a much higher combined expenditure on transport and housing than if it lived elsewhere in France.
Where are the best and worst off households?
Overall, perhaps unsurprisingly, Parisians were found to be the ‘best off’ in terms of absolute income.
However, their cost of living and quality of housing actually means that they are less well-off than the rest of the country (although with unparalleled proximity to culture and other advantages of the capital).
To determine the answer to this question, France Stratégie used an indicator of financial comfort.
This takes into account both the resources of households and the costs and constraints they face to calculate what is left to live off after transport, housing and food expenses.
Paris has higher income…and highest costs
The cost of this ‘transport-housing-food basket’ is by far the highest for households in the Paris region. However, this is also the region where the average level of resources is also the highest.
Paris is also where the average ‘remaining expenditure’ of households is the highest (approximately €1,150 per month in 2017).
However, the average amount is lowest in the centre of employment zones and in municipalities that are more than 30km away from the capital (€880 and €850 per month per household respectively).
However, some of the extra expenditure among more well-off households in Paris does not necessarily correspond to ‘necessity’, even if it comes under the banner of ‘transport’. For example, a person can travel at the same rate with a €5,000 second-hand car and a €200,000 luxury car.
Read also: How much do you need to earn to count as rich in France?
Expenses calculations
France Stratégie explained how it helps to compensate for these expenditure differences in its calculations.
It said: “We use a more elaborate version of the ‘remainder to spend’, by estimating, for each household, what it would have left if it had the level of expenditure of a modest household with the same other characteristics (family set-up and location in particular).
“This is a way of isolating, in the expenditure, what can be considered as dependent on its standard of living. With this new [calculation], the remaining expenditure of well-off households is higher, since we calculate what they would have left proportionally, if they spent in the same way as modest households.”
It added: “Poor households, on the contrary, have decreased [spending]. But the conclusions on geographical differences are unchanged and even more significant: Differences in resources explain the differences in remaining spending power from one area to another, before possible differences in needs or costs.”
Indeed, the study found that at 2017 prices, households on the outskirts of an employment zone tend to offset their costs between transport and housing expenses (except in the Paris region), meaning that they are not necessarily worse off than those in the centre.
Paris figures deceptive
Overall, the report’s major finding was that households living on the outskirts of employment areas, and in their very centres, face the most constrained budgets.
However, this is not because they face higher costs but because their resources are lower.
And while Paris residents may appear to fare better, this is misleading, because their location plays a major role in their living expenses.
France Stratégie says that the reason for this is that "the price of housing is much higher than in the rest of France".
As a result, "living in the Paris region reduces the remaining expenditure by €80 per month" for households with the same standard of living, family set-up, housing occupation status (owner or tenant), and age”, it said.
“Even worse, housing expenses have become so high for tenants in the private sector that they cancel out the Paris-region financial advantage of these households…when we take into account the sacrifices they make in terms of housing conditions," added France Stratégie.
Overall, Parisians have more money left to spend than other regions because they earn more than elsewhere, but also because they agree to being more ‘poorly housed’ compared to the rest of the country.
From this point of view, they are worse off than the rest of the country.
Nevertheless, France Stratégie also points out that Paris offers a cultural life (theatres, restaurants, museums, etc.) that is unparalleled in France.
*These analyses can be found in the notes published by France Stratégie.
Researchers Boris Le Hir and Pierre-Henri Bono offer a note with detailed analysis of the determinants of territorial variability in transport and housing expenditures, and contribute to the study costs associated with city analysis that they call ‘metropolitanisation’.
Pierre-Yves Cusset and Alain Trannoy's study focuses on the geographical variability of households' remaining expenditure, and contributes to the analysis of inequalities in living conditions.
Both are based on the same main source, the latest INSEE Family Budget survey, from 2017.
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