Why increase the minimum wage to 1,600 euros is a debate

Decryption To boost purchasing power, the New Popular Front is proposing to increase the minimum wage to 1,600 euros net. The effects of the measure on consumption, employment and public finances remain to be evaluated.

The minimum wage of 1,600 euros: this is the major measure derided in the “social emergency” decreed by the New Popular Front, the alliance of the left with a view to the early legislative elections. That is to say a 14% increase in the minimum wage, currently at 1,398.70 euros net for full time at 35 hours. This boost to the lowest wages is intended to be a purchasing power response, with left-wing leaders estimating that it could boost household disposable income by around 10 billion euros per year.

In France, currently, 3.1 million people are paid the minimum wage. This is a million more than in 2021. This “minimum growth wage” is, unlike other wages, adjusted according to inflation, and after months of price increases has logically “included” a majority of low wages. The doper will necessarily absorb a large part of the salaries just above, which will in fact increase to the minimum wage.

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Representatives of the New Popular Front also praise this measure for its multiplier effects on demand: “ Business leaders have every interest in ensuring that their employees are consumers who buy their products,” pleaded the socialist deputy Boris Vallaud, facing representatives of employers’ organizations, this Thursday, June 20.

However, the bosses take a dim view of the measure. An increase in the minimum wage means an increase in labor costs, particularly for low-paying companies. “ Such a measure would result in waves of layoffs and/or hiring freezes for our companies without current employees benefiting from any concrete benefits. », criticizes Marc Sanchez, president of the Union of Independents and Very Small Enterprises.

Recognizing that the measure will, for certain companies, “a difficult time, which can last up to two years”, Boris Vallaud is counting on the creation of a state aid fund to absorb the shock, and is calling for goodwill… from large companies. “I believe that the majority of companies want to pay their employees well”he said.

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Towards an increase in unemployment?

At the Ministry of the Economy, the specter of mass unemployment is already being raised. “ And baker who employs three minimum wage workers should fire one to continue paying the other two… », A source slips to us at Bercy.

A study published by the OFCE in 2012, however, considered that a 1% salary increase would result in a net destruction of 2,300 jobs. Taking these figures and multiplying them by 14, the Montaigne Institute asserts that the increase in the minimum wage to 1,600 euros would result in the elimination of 30,000 jobs. However, the liberal institute invites us to consider that this estimate as “uncertain” – the economic context has evolved significantly since 2012.

For Clément Carbonnier, economist at Paris-8 University, there is no link between the increase in the minimum wage and unemployment, from a macroeconomic perspective. Of course, this increase may for a time discourage hiring new employees but, overall, there is no direct consequence. Particularly because low wages are concentrated in specific sectors: accommodation and catering, administrative services, transport and shops. Precisely where it is difficult to envisage cutting jobs. “It is not because lower paid work costs more that we will stop using it, believes Carbonnier. Quite simply because in many cases it is not possible to replace it with anything else. »

The economist takes the example of supermarkets, often brandished as examples of the substitution of human labor by machines: the arrival of automatic checkouts has not resulted in massive layoffs in the sector.

In addition, jobs paid the minimum wage are over-represented in sectors affected by subcontracting, such as cleaning or security. Also, for Carbonnier, the increase in the minimum wage “will be included in the production costs of the ordering company, not in the one that employs the employees. However, they cannot do without their cleaning or security activities, and, most often, can assume this increase in costs. »

What cost does the measure cost?

Another question: the cost of the measure. In addition to the fund promised to companies – which could take the form of compensation between companies which employ low wages and others –, increasing the minimum wage would result in a relative reduction in employee contributions. And therefore a shortfall for the State.

In fact, low wages are subject to reductions in social security contributions. The latter are defined as a percentage of the gross minimum wage (40.14% of the gross salary decreasing up to 7.8% from 1.6 to 2.5 minimum wage, then 1.8% from 2.5 to 3.5 minimum wage) . If the minimum wage increases to 1,600 euros, the contribution reduction would rise to 811 euros (compared to 709 euros today).

The Montaigne Institute estimates the shortfall for public administration at 3 billion euros. Clément Carbonnier speaks rather of “ around ten billion euros ».