Report
Patrick Artus

How to think about the issue of purchasing power in France?

There is strong collective demand in France to increase wage earners' purchasing power. So what questions should be asked? Are companies’ profit margins abnormally high (have they increased over time, do they exceed corporate investment needs)? If the answer is yes, there is an obvious policy of skewing income distribution in favour of wage earners. We see that corporate profit margins are normal, which does not argue for an across-the-board increase in wages; Would an increase in the lowest wages have a negative effect on low-skilled employment? If the answer is yes, the increase in low wages must be combined with a policy of lowering the cost of low-skilled labour financed by taxing higher-income households or capital income. However, there is no obvious historical link between the trend in the minimum wage and in low-skilled unemployment; Can we “work more to earn more”? While we do not want to call into question the current rules on working hours, which moreover do not seem to be very restrictive at present, we can decide to allocate all hourly labour productivity gains in the future to increases in real hourly wages and not to reductions in working hours, which has not been the case in the past. All things considered , we should probably reject drastic measures such as a sharp across-the-board increase in wages, a sharp increase in the minimum wage without anything in return, and prefer gradual measures (the use of all hourly productivity gains to increase the real wage).
Provider
Natixis
Natixis

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Analysts
Patrick Artus

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