Marc Sanchez feels like he’s living a bad dream… which repeats itself. Like the Nupes in 2022, the New Popular Front plans to increase the minimum wage by 200 euros net, to bring it to 1,600 euros, if it comes to power. And this, in the fifteen days following his potential victory in the early legislative elections. “This is not good news for small bosses,” admits the general secretary of the Union of Independents and Small Businesses (SDI). Since the presentation of the program of the alliance established between the Socialist Party, the Communist Party, La France insoumise (LFI) and the environmentalists, employers’ organizations and business leaders have been pulling out all the stops to hammer home their opposition.
Members of the government, too, stepped up to the plate. For Bruno Le Maire, “it would be a catastrophe” which would lead to “mass unemployment”. As for Gabriel Attal, he assures that this measure would destroy no less than 500,000 jobs. Within VSEs and SMEs, certain leaders are already taking the lead. “In our last survey, 22% of business leaders surveyed had the possibility of recruiting someone. For a week and a half, we have noticed that all hiring that is not necessary has been stopped,” reports Marc Sanchez.
During their grand oral presentation before Medef, Thursday June 20, the former president of the Finance Commission, Eric Coquerel (LFI) and the outgoing deputy Boris Vallaud (PS), promised that nothing was going to change for VSEs which would otherwise be “compensated”. Without specifying the mechanism envisaged.
But could the State, under threat of an excessive deficit procedure from the European Commission, afford this largesse? Regardless of possible compensation, “the cost of the revaluation of the minimum wage could approach 4 billion euros. We tend to forget that most social contributions have been eliminated at the level of the minimum wage. With such an increase, a increasing share of employees just above the minimum wage would be absorbed, which would further reduce the number of people contributing, placing an increased burden on the taxpayer since the State will have to compensate for the reductions in social security contributions”, explains economist Marie -Claire Villeval, former member of the group of experts on the minimum wage.
A “punch” rather than a “nudge”?
In addition to the significant increase of 14.3% in the minimum wage planned by the left coalition – the largest since the creation of this threshold in 1950 – it is also the way of proceeding that raises questions. Rather than carrying out a progressive movement, the New Popular Front would opt for immediate application.
“All sudden changes are always the most damaging from an economic point of view. We prefer smoother and gentler developments,” points out Yannick L’horty, professor of economics at Gustave-Eiffel University. According to him, “this increase would constitute a radical shift, while we have been in a context of moderation of the minimum wage for fifteen years. We would move from a policy of active support of supply to a policy of support of demand .”
As a result, the most fragile small and medium-sized businesses could be forced to lay off some of their employees to keep up with the pace imposed by this revaluation or to stop investing. “It would not be a “boost”, but a “punch”. This sudden increase of 14% would certainly be a popular measure, but also a lazy one, which would entail a big economic risk”, assures Marie-Claire Villeval. Same observation for Henri Sterdyniak, economist at the French Observatory of Economic Conditions, who campaigns for an in-between by applying this revaluation “over three years, while in the meantime launching an incentive policy for companies in order to reduce a certain number of excessive salaries.
The SDI, which has more than 25,000 members, calculated that this campaign promise would cost an additional 6,500 euros per year per employee each year. And the bill could get even higher. “You have to keep in mind that when you increase the minimum wage, you directly affect the salary scale. It’s much more complicated than it seems,” recalls Jean-Eudes du Mesnil du Buisson, general secretary. of the Confederation of Small and Medium Enterprises, which fears a domino effect.
“We can then imagine that numerous demands would follow in order to obtain increases for all employees paid just above the minimum wage, fueling an inflationary spiral and reinforcing the cost of labor in France by compared to other European countries, while further weakening our competitiveness”, adds Marie-Claire Villeval. An element to take into account, at a time when Emmanuel Macron hopes to revive competitiveness at the European level.
The minimum wage of France, the real problem
This revaluation would nevertheless have the merit of stimulating growth. “When you increase the minimum wage by 200 euros per month, low-paid employees will not save but spend them. This can have a macroeconomic effect by boosting consumption,” recognizes Stéphane Carcillo, professor affiliated with the economics department at Sciences Po. and head of the OECD’s employment and income division.
On the other hand, it would in no way solve the problem of poverty in France. “The minimum wage is not a good tool for reducing impoverishment. The employees who benefit from it are not necessarily people who live in poor households. They are often attached to households where the second person has an income greater than the minimum wage”, continues the economist. According to him, we should instead rely on tools developed over the past fifteen years to increase income, without causing an increase in labor costs such as the activity bonus.
In reality, the New Popular Front here avoids talking about the real angry subject: the minimum wage of France. The number of French employees receiving the minimum wage increased from 12% in 2021 to 17.3% in 2023. The reason: the minimum wage being indexed to inflation, it has caught up with low wages. “How can we accept that an electoral promise leads to making France the country with a fifth of minimum wage? This should not make our children dream… Our objective should be, on the contrary, to create the economic conditions for a reduction in the number of employees paid at the minimum wage through professional mobility and support for the exit from jobs paid at the minimum wage!”, says Marie-Claire Villeval. A policy, it is true, more complex to implement than the easy solution favored by the New Popular Front.
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