This is the first project of the new government. Food voucher, tariff shield, tripling of the Macron bonus… To cope with the inflation of food and energy prices, thee purchasing power bill will be presented to the Council of Ministers after the legislative elections, declared Monday, May 23, the new government spokesperson, Olivia Grégoire.
Lhe president of the MoDem group in the National Assembly, Patrick Mignola, for his part defended, on Sunday, the action already taken by Emmanuel Macron during his first five-year term to protect the portfolio of households. “For five years, purchasing power (…) has increased on average by 1,400 euros per French person and per year”, assured the deputy of Savoy in the program “Sunday in politics” on France 3 (excerpt from 14’10”). But is this order of magnitude correct?
In an analysis note published in March, the French Observatory of Economic Conditions (OFCE) precisely quantified the gains in purchasing power of households during the first five-year term of Emmanuel Macron. Lhe economics research center, attached to Sciences Po Paris, relied on evolution of “purchasing power of gross disposable income”. This indicator corresponds to the addition of income from work (salaries), capital (rents, dividends), as well as social benefits, less social security contributions and taxes, while taking into account the evolution of prices. These data are presented by “consumption unit”a statistical tool to “compare the standards of living of households of different size or composition”as INSEE explains.
The study concludes that Emmanuel Macron’s first term at the Elysée Palace ended in “positive earnings” for French households. On average, purchasing power per consumption unit increased by 294 euros per year (+0.9% per year). A figure almost five times lower than that put forward by Patrick Mignola. VSHowever, this increase is significantly higher than that observed during the two previous five-year terms. According to the OFCE, the average annual gain was 78 euros (+ 0.2% per year) during the presidency of Nicolas Sarkozy (2007-2012), and 16 euros (+ 0.1% per year) under François Hollande (2012-2017).
Other studies, based on different methodologies, have confirmed an increase in purchasing power over the past five years. In October, the Economic, Social and Financial Report for 2022 (PDF)written by the Directorate General of the Treasury, attached to the Ministry of the Economy, had pointed to a more marked increase in purchasing power gains during Emmanuel Macron’s five-year term than under those of his two predecessors. For its part, the Institute of Public Policy (IPP) published a study in March on the redistributive effects of the socio-fiscal measures of the past five-year term. (PDF), who judges that “average gains are positive for a large majority of households”.
So how can this increase in purchasing power be explained? First, by “improvement of the labor market”, details Pierre Madec, co-author of the OFCE study. The economist recalls that more than a million jobs were created between 2017 and 2022. The study underlines also the impact of the social and tax measures implemented during the five-year term.
“The evolution of direct tax and social security levies on households contributed positively to purchasing power, which had never been observed during the four previous mandates.”
OFCEin an analysis note published in March
Nevertheless, “these averages hide extremely significant disparities” depending on household living standards, warns Pierre Madec. “The big winners of the socio-fiscal measures are the middle classes who have benefited from the abolition of the housing tax, the tax exemption for overtime or the revaluation of the activity bonus”, analyzes the economist. Their purchasing power has increased by an average of 7% over the past five years. That’s why I wrote to you of the 10% of the poorest households would have risen by around 5.3%, against 3.5% for the wealthiest.
But if we report these percentages in euros, the increase in purchasing power over the entire five-year period would be 600 euros for the most modest, against 2,600 euros for the wealthiest, calculates the OFCE. The latter have notably benefited from the abolition of the wealth tax (ISF), transformed into a property wealth tax (IFI). Moreover, by observing more closely in the slices of living standards, some middle-class households have lost purchasing power, such as retirees.
“Retirees have suffered from the increase in the General Social Contribution (CSG) and the under-indexation of pensions.”
Pierre Madec, economist at the OFCEat franceinfo
Among the most modest households, some also “lost standard of living with the reform of unemployment insurance or the reduction of housing aid”, emphasizes Pierre Madec. Rising tobacco prices have also weighed more heavily on their wallets.
Contacted by franceinfo, Patrick Mignola argues that the increase in purchasing power of 1,400 euros per year mentioned on Sunday concerns “the first deciles” standards of living, that is to say the most modest, and not all French people. The MoDem deputy estimates that these households have earned 120 euros per month thanks to four measures taken during the five-year term: the abolition of the housing tax, the increase in the activity bonus, the reduction in wage costs and that of the income tax. A surprising calculation, since the most modest households are most often exempt from income tax and housing tax.
The elected official also does not take into account the measures that have weighed on their purchasing power. The values he puts forward therefore deviate significantly from the calculations of the OFCE. On the first two deciles, that is to say the most modest 20%, the research center estimates between 65 and 295 euros per year the gains in purchasing power directly linked to the government’s tax and social measures.
Nevertheless, if the increase in purchasing power makes overall consensus, the analyzes diverge on the main beneficiaries of the fiscal and social measures of the first five-year term of Emmanuel Macron. The Directorate General of the Treasury estimates, for example, that the “modest households, located in the first tenths of the standard of living” are those who have benefited “of the most significant increase in purchasing power in percentage”. Conversely, the IPP concludes that the five-year measures have generated greater gains for the richest 1% than for the poorest 5%. These divergent results are due to methodological differences, particularly in the scope of the measures taken into account, as explained by the OFCE and the IPP in their recent notes.
Finally, on the set of France 3, Patrick Mignola underlined that inflation had “cropped” purchasing power gains. Indeed, the rise in prices, largely due to the cost of energy, would have led to losses of purchasing power for more than 60% of households in 2021, according to OFCE estimates. Again, with great disparities depending on the French. The study finds that “10% of households experienced inflation below 1.8% while 10% experienced an increase in their consumer basket above 5.3%”.
“Households that have high energy expenditure, due to their mode of transport or their heating, suffered higher inflation.”
Pierre Madec, economist at the OFCEwith franceinfo
For at least a third of French households, the strengthening of the energy check and the inflation allowance nevertheless made it possible to compensate for these losses in purchasing power last year, according to the study. These schemes have particularly benefited the 10% of the most modest households. Losses are the reverse “maximum” for households around the median income.
For the time being, this work does not take into account the acceleration of inflation in 2022, observed since the start of the war in Ukraine at the end of February, and the new measures recently implemented by the government (rebate on prices at the pump, increase in the mileage allowance scale, etc.).