Report
Patrick Artus

Should wages be cut to save jobs?

We take the example of France; we sometimes hear proposals to cut wages to save jobs after the COVID crisis. What to think about this proposal? From a macroeconomic point of view , the issue is income distribution due to the crisis. In 2020, all or almost all of the loss of income has been borne by the government; changing to a situation where part of the loss of income is borne by wage earners and no longer by the government would weaken demand, and there would be a risk of returning to the situation in 2010-2011 where the switch to a less expansionary fiscal policy caused the economy to plummet again; From a microeconomic point of view, it would have to be possible to divide companies in trouble into those whose situation will return to normal and those whose situation will remain poor. For the former, in order to respect the macroeconomic logic, the government would have to temporarily cover part of the wages and not reduce them; in the latter, it is pointless to try to save jobs, and redeployment or re-skilling of employees must be supported . The problem is that it is very difficult to distinguish between these two groups of companies in difficulty.
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Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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