the shocking proposals of two economists to “revitalize wages” – L’Express

the shocking proposals of two economists to revitalize wages –

So that the lowest paid employees can receive raises more easily, a report much awaited, made public this Thursday, October 3, proposes to distribute differently the contribution reductions currently highly concentrated at the minimum wage level.

“We propose to break the dynamic consisting of constantly strengthening exemptions on low wages,” indicate economists Antoine Bozio and Etienne Wasmer in the final version of their work, submitted to the government which commissioned them in November. In order to eliminate threshold effects and reduce the cost for employers of salary increases, they propose in their central scenario to increase contributions between 1 and 1.2 SMIC, to reduce them between 1.2 and 1.9 SMIC and increase them to between 1.9 and 3.5 SMIC. The reductions would stop at 2.5 SMIC, compared to 3.5 SMIC today.

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The system of exemptions which has gradually been put in place in France over the past three decades has resulted in the contribution rate which weighs on a minimum wage being no more than 6.9% compared to 45% in 1993, placing France at the bottom of the table at the level of OECD countries. The number of employees paid the minimum wage has increased significantly in France. As of January 1, 2023, 17.3% of employees were affected. In certain cases with the current system, the employee himself is not encouraged to ask for an increase, because he can lose all or part of his activity bonus if he is increased.

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Rising labor costs

For a single person without children at the minimum wage level, “the increase in labor costs necessary for an increase in disposable income of 100 euros per month is, in October 2023, 483 euros, of which 78 euros can be explained by the variation of the activity bonus”, according to the report.

There are also significant threshold effects, according to economists who mention the case of an increase in gross monthly salary from 3,803 euros to 3,804 euros (at the threshold of 2.5 SMIC), which “leads for the employer to an increase in annual labor costs of 2,756 euros, compared to a net gain for the employee of around 9.50 euros over the year. The reform should make it possible to “revitalize salaries”, affirmed Etienne Wasmer during a press point: with the central scenario, the cost of increasing employees would drop “quite significantly, around 10%”. In the case of a single person without children at the minimum wage level, the increase of 100 euros would cost 430 euros and no longer 483 euros.

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