Labour market polarisation, support for low wages, competitiveness, move up the value chain and fiscal deficits

We will use the example of France, but this analysis applies to all OECD countries. The structure of jobs evolves according to the polarisation model: a few intermediate jobs (especially in industry) are replaced by sophisticated jobs and many of them by unsophisticated jobs in domestic services. This leads to a rise in the number of jobs with low wages and increased in equality. It is then legitimate to support low wages, but this cannot be done by increasing wages to avoid a loss of competitiveness and job destruction . This support then inevitably takes the form of additional income paid by the government to low-income individuals ("negative tax", called “ activity bonus ” in France). The reduction in inequality then leads to an increase in the fiscal deficit, which is bearable only if there is simultaneously a move up the value chain for the economy and a rise in the employment rate, leading to additional tax revenues that cancel out the fiscal deficit. So the polarisation of jobs can be corrected only if there is an upturn in potential production.