This is one of the striking proposals of the New Popular Front, which has promised to raise the monthly minimum wage by 200 euros net while it aspires to the governorship after coming out on top in the legislative elections. While the measure deeply divides the political world and worries bosses, economists do not necessarily view it with a bad eye. RFI takes stock of the potential implications of a minimum wage of 1,600 euros.
■ What does the New Popular Front propose?
This is one of the flagship measures of the New Popular Front. The left-wing coalition formed for the early legislative elections promised during its campaign that it would increase the minimum wage to 1,600 euros net in the event of victory. Since the minimum wage is set at 1,398.20 euros net, the measure would therefore result in an increase of just over 200 euros per month in the minimum wage in France, or an increase of 14.4%.
In France, the minimum wage is automatically revalued every January 1st, according to the evolution of the consumer price index which is calculated every month by INSEE, recalls the researcher in social law Pascal Caillaud on the Highlighters website. If, during the year, this index increases by at least 2% compared to that observed at the beginning of the year, a decree must increase the minimum wage by the same proportion the following month. In addition to these mandatory increases, the government can decide to revalue it: the famous “boost” promised by the NFP.
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For businesses, an increase of 14.4% would represent an additional cost of 530 to 550 euros per month and per employee at the minimum wage. Well aware that some SMEs and VSEs will have difficulty implementing this increase in the minimum wage, the NFP provides for 0% loan mechanisms over one or two years, a solidarity fund or even a negative rate credit system to help these businesses while waiting for ” the virtuous effects of the general increase in wages are being felt ” The financing of these aid programs has not been specified.
■ Who is affected by the proposal?
In 2023, nearly 17% of French employees were paid the minimum wage, a figure that has been constantly increasing since 2021, when they were only 12%. This represents 3.1 million employees.
The impact of this increase will, however, be very different depending on the field of activity and the size of the companies. A company that has a fairly strong market power, because it has few competitors for example, will be able to pass this increase on to the consumer quite easily by increasing its prices and without suffering a collapse in demand, notes Eric Dor, director of economic studies at the Ieseg School of Management. A company that makes very large profit margins will also be able to absorb the shock by reducing its profits while remaining in a comfortable situation. But there are also all those that are already just at the break-even point and will not be able to absorb such a sharp increase in wage costs. We are thinking above all of course of the VSEs and SMEs. » France has 159,000 small and medium-sized businesses.
■ What precedents in France?
France is the sixth country in the European Union with the highest minimum wage, according to the Eurostat agency. It is also the one where the increase has been the lowest in ten years. Apart from these automatic revaluations imposed by law, the last increase dates back to 2012 with the election of Francois HollandeIt is 2%: +1.4%, for anticipated inflation and +0.6% as a “boost”.
An increase of more than 14% would be unprecedented since 1981, and the +10% granted by the left that came to power with François Mitterrand. Since then, it has never exceeded 4%. Only two presidents have not increased the minimum wage upon their arrival at the Élysée: Nicolas Sarkozy in 2007 and Emmanuel Macron in 2017.
■ Why is this proposal so worrying?
Increasing the minimum wage would mean increasing the cost of labor, French companies would thus be forced to increase their expenses, which could imply a potential destruction of jobs, or even the disappearance of certain companies. According to the Prime Minister Gabriel Attalincreasing the minimum wage to 1,600 euros could destroy nearly 500,000 jobs.
A minimum wage set at 1,600 euros net per month would have an undeniable effect on the labor market, but there is no consensus on the issue among economists. Eric Heyer, an economist at the French Observatory of Economic Conjectures, estimated to AFP that nearly 322,000 jobs could be threatened by such an increase.
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But other effects induced by the increase in the minimum wage could largely offset this figure. The first is the increase in consumption generated by the rise in wages. When business demand increases, they hire “, which could generate 142,000 jobs, according to Éric Heyer.
The second is a reduction in social security contributions which would result from the measures to reduce charges in force in the French system on salaries close to the minimum wage. There is an automatic mechanism: increasing the minimum wage increases the exemptions on salaries above it. “, explained the economist Michaël Zemmour on RMC. For a company that has some employees on minimum wage, others paid a little more, and then others paid even more, the costs are in fact partly offset by this automatic effect of exemptions. “, he developed. Thus, ” increase the minimum wage by 14% ” does not equal ” not at all at 14% increase for businesses “.
These reductions in social security contributions, which could cost the State budget 20 billion euros – 10 billion for the most optimistic – would allow many companies to make savings and thus create jobs, up to 151,000, according to Éric Heyer. That is 293,000 in total. The number of jobs that could be destroyed by an increase in the minimum wage would therefore be limited to just under 30,000.
” But be careful not to overestimate the positive impact of this Keynesian recovery. “, warns Eric Dor. In a globalized economy and at a time when consumers are looking for the best price, an increase in wages and therefore in purchasing power could mainly benefit more competitive foreign companies. Which would further degrade the French trade balance.
■ What examples abroad?
The leaders of the New Popular Front are defending their flagship measure by relying on neighbouring countries. The head of the Greens, Marine Tondelier, cites the case of Germany, where the minimum wage was increased by 22% in 2022, from 10.45 euros to 12 euros per hour. Another example: that of Spain, where the minimum wage was increased by 54% in six years, with a 22% increase in 2019. When we look empirically – for example in Germany, Spain or Ontario which increased the minimum wage in 2018 by 20% – we do not see a drop in employment. “, supports economist Clément Carbonnier.
Here again, this observation must be put into perspective. The 2019 increase in Spain has been extensively studied. However, there has been a slight deterioration in employment, which, as always, has affected women and older workers more. And, unsurprisingly, the negative effect on employment has been strongest in the South “, notes economist Éric Dor.