Is the minimum wage of 1,600 euros net a ” job destruction machine », as Gabriel Attal said during the debate with Jordan Bardella and Manuel Bompard on TF1, last Tuesday? The New Popular Front proposes in its program to increase the amount of the minimum wage, currently set at 1,398.70 euros. However, according to the Prime Minister, such a measure would destroy “500,000 jobs” in France, he warned during the press conference presenting his program last Thursday.
Concretely, such a decision would result in an increase of 14.4% compared to the amount set today (12.4% if we deduct the mechanical increase of 2% expected in August due to inflation), indicates Éric Heyer, economist at the French Economic Observatory (OFCE).
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The measure is already making economic circles grind their teeth, starting with very small and medium-sized enterprises (VSEs), which represent nearly 4.5 million companies and 6.9 million employees in France according to INSEE figures. The minimum wage of 1,600 euros net per month generates “ an increase for the company from 530 to 550 euros ” per employee, deplores Marc Sanchez, General Secretary of the Union of the Self-Employed and Very Small Enterprises (SDI).
« If the company has three employees on minimum wage, this rises to 1,500 euros per month and 18,000 euros per year “, he denounces, recalling at the same time that “ in very small businesses with fewer than five or one employees, half of the managers earn less than the minimum wage.
According to a survey published this Thursday by the CPME, 14% of managers say, in fact, that they would cease their activity in the event of an increase in the minimum wage to 1,600 euros net, 27% that they would lay off and 50% that they would pass these wage increases on to their selling prices. “ Only one manager in 10 (10%) would be able to absorb this additional cost in their margins “, indicates the CPME in a press release.
Hundreds of thousands of jobs destroyed
For Éric Heyer, the minimum wage of 1,600 euros net would generate “ three effects on employment “. The first on the cost of labor at the minimum wage level: ” When the minimum wage increases, the cost of labor increases and this destroys jobs », Explains the economist. This direct effect would lead to 322,000 jobs destroyed, according to his model, of which he himself recognizes certain limits in the face of such a significant increase in the minimum wage. Second effect? An increase in consumption.
« Wages will have increased so that will create additional demand. This “demand” effect creates 142,000 jobs. ” moreover, according to Eric Heyer.
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Third effect on employment, a reduction in the cost of labor for salaries above the minimum wage.
« Exemptions from social security contributions depend on the level of the minimum wage. When the minimum wage increases and there is not a complete diffusion of this minimum wage on other salaries, more people benefit from these exemptions. This leads to a reduction in the cost of labor for companies which creates 151,000 jobs. », explains Eric Heyer.
Clearly, if the minimum wage increases but not the salaries just above it, the general reduction in employer contributions, which allows employers to lowering charges for salaries not exceeding 1.6 SMIC per year will affect more employees. This will lead to a reduction in labor costs and therefore hiring for companies.
In total, the economist therefore anticipates the net destruction of 29,000 jobs. To which must be added, according to him, a cost of “ 0,3% PIB » for public finances, resulting from the increase in reductions in social security contributions.
To reduce this deficit, measures such as an increase in VAT, an increase in income taxes or a reduction in public spending could “ redestroy ” jobs to reach 50,000 job losses in total. In summary, ” It destroys jobs, but it is not monstrous. », Analyzes the economist at the OFCE.
« This is not the catastrophe of 500,000 job losses announced by the government. »
Risk of “low-wage trap”
A point of view which is not unanimously shared. Stéphane Carcillo, professor affiliated with the economics department at Sciences Po, is less optimistic. He anticipates the destruction of “ several hundred thousand net jobs ».
« The minimum wage is already protected from inflation, it has not decreased in purchasing power and has increased faster than other salaries. It has therefore already caused a fairly strong compression of salaries in our country. Increasing it by another 200 euros carries significant risks for employment. », warns the employment specialist, who fears in particular “ a fairly significant risk of a low-wage trap ».
For Michaël Zemmour, lecturer in economics at the University of Lyon II and supporter of the New Popular Front, the figure of 500,000 jobs destroyed by the introduction of the minimum wage at 1,600 euros net, put forward by the presidential majority, ” doesn’t seem serious “The economist expects that the drop in labor costs for salaries above the minimum wage will serve as a “ shock absorber » to the destruction of jobs. “ If the order of magnitude is that of 29,000 jobs destroyed by the OFCE, this represents less than 0.1 point of the unemployment rate. », he puts things into perspective. For him, the proposal of the New Popular Front is therefore “not not that terrifying ».
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Asked about the risk for the competitiveness of companies at the international level, Michaël Zemmour believes that “ the minimum wage concerns relatively few exposed sectors ”, quoting “ cleaning, catering, personal services.” “Exporting sectors are little affected by lower wages », he adds. The economist specifies that “ The measure is difficult to envisage other than through a calendar over several months ».
« If the minimum wage is revalued quite sharply, the goal is that salaries above the minimum wage are also renegotiated. We need to give them time to do it. ».
Limited effects on inflation and poverty
On inflation, economists agree that the minimum wage of 1,600 euros net would have little effect. “ When the minimum wage increases by 1%, other salaries increase by 0.11%. When it increases by 12%, the others by 1.4%. And when wages increase by 1%, prices do not increase by 1% but by around 0.55%, so inflation will increase by 0.7%-0.8% », avance Eric Heyer.
« It depends on how much companies will spend cost effects on prices. In general, these effects are very negligible, so I don’t think it has any major effects. », acquiesce Stéphane Carcillo.
The professor affiliated with the economics department of Sciences Po also expects an effect “ very marginal on poverty ». « Often, minimum wage earners are not in poor families, contrary to what one might intuitively think. They can live with someone who has a much higher income. “, he says.
« Increasing the minimum wage does little to reduce the poverty rate, unlike other measures such as the activity bonus which are very well targeted because they depend on the family situation, the number of children, etc. » According to INSEE, the poverty threshold corresponds to a disposable income of 1,158 euros per month for a single person, and 2,432 euros for a couple with two children under 14.
