The left-wing alliance, which came out on top in the early legislative elections, is proposing, among other things, an increase in the minimum wage to 1,600 euros net. Four questions to understand this measure that divides economists.
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Raising the minimum wage to 1,600 euros net is one of the flagship proposals of the New Popular Front’s economic program. Today, the minimum wage is just under 1,400 euros per month. The proposal would increase the figure to 200 euros net on the pay slip, to increase employees’ purchasing power. But it gives many business leaders the shivers and even divides economists.
How does the New Popular Front intend to finance this measure?
The alliance of left-wing parties promises to help very small businesses, those for whom this increase in the minimum wage will be the most painful. Among the avenues put forward by the New Popular Front: zero-rate loans, thanks to a “public banking center”temporary cash flow facilities and easier access for these VSEs to public markets. However, all this has not been quantified. There are also the numerous exemptions from employer contributions on low salaries, which already exist
and which cost 30 billion euros in 2022.
“There will be a net cost, assumed”recognizes an economist who supports the NFP’s economic program. With this measure, French households would receive 10 billion euros more, which would be used for consumption.
Why is this measure being criticised by the presidential majority, the right and the employers?
The minimum wage of 1,600 euros is shaping up to be a “job-destroying machine”according to Gabriel Attal. The Prime Minister even mentions 500,000 jobs under threat. The measure could push some bosses to close their doors, according to a survey published by the Confederation of Small and Medium-Sized Enterprises (CPME) two weeks ago. Thus, 14% of managers assure that they will cease their activity, and more than a quarter of them assure that they will have to lay off part of their staff.
The Building Federation, which announced the destruction of 25,000 in the first quarter of 2024, is warning against this measure, which it considers “extreme” in the current economic context.
Is the issue of salaries a priority for the executive?
Last year, when Elisabeth Borne was the tenant of Matignon, the “demicardization” was one of the main topics of the social return. A high council on remuneration was even set up, because it is a real subject of concern for employees. Today 17% of them are paid the minimum wage, whereas with this measure they could be 20%, or 1 worker in 5 in France.
Does this measure risk further “minimum wage” reduction in the country?
The risk exists, but the momentum has already been underway since 2021. The minimum wage has been increased eight times in three years, to keep up with inflation. Result: the minimum wage has caught up with that of other employees, often more experienced. The latter sometimes have 10 to 30 years of seniority and their salary has changed very little. “Staying on minimum wage for years is worse than being paid at minimum wage”underlines the economist Gilbert Cette, who chaired the expert committee on the subject.
This is why the question of salary mobility is also crucial: we need to change the branch minima and salary scales. These skills belong to the branches and companies concerned.