“We can’t help everyone”, warns Monday, June 27 on franceinfo Eric Heyer, economist, director of the analysis and forecasting department at the French Observatory of Economic Conditions (OFCE). The Minister of the Economy, Bruno Le Maire, warned on BFM TV on Monday June 27 that “alert rating” has been achieved with regard to public finances. The government provides targeted aid to help French people on low incomes cope with inflation. He must present on July 6 in the Council of Ministers his law on purchasing power and his amending budget. The Smic will increase automatically since it is indexed to inflation. But the economist fears a “inflationary spiral” if this increase spreads over all salaries.
franceinfo: Will these targeted aids really help low incomes?
Eric Heyer: Of course that will help offset some of the loss of purchasing power. They are relatively targeted on the most modest households, both via services and APL. It’s the right option because you have to keep in mind, we won’t be able to help everyone. Bruno Le Maire tells us that we have reached the alert level on public finances, so we will have to make choices. Companies will also have to help maintain purchasing power and some households that have oversaved will have to use this oversaving to try to compensate. What was clearly indicated by the latest note from INSEE is that this inflation is completely unequal, but not only according to income. If you are rural, you are much more penalized than if you are urban. Likewise, it depends on age. If you are retired or old, you are penalized more than if you are young. It also depends on your role. That is to say that if you are a farmer, you are much more impacted than if you are an executive. The target of these measures today is rather your income, when in fact you are weakened, even if you have a slightly higher income. So maybe the government should do more targeted measures based on where you live, where you work, or how old you are.
Should the minimum wage be raised?
There is a normal increase in the Smic. The minimum wage is indexed to inflation. So we can consider that there, in any case, there will be an automatic increase in the minimum wage. It is expected either in August or in September. But we are almost certain that by October, the minimum wage will be automatically revalued as soon as inflation increases by 2% compared to the last increase. The problem is that when the Smic is indexed, is there a diffusion of this increase in the Smic on other salaries? If there is a diffusion, we can effectively fear the inflationary spiral. It should of course be avoided because the central bank will have no choice but to increase interest rates very quickly and cause a recession. We want to avoid it at all costs.
Can the government put pressure on companies?
There are pressures that have been formulated by the government on a number of branches. It will be necessary, indeed, that the branches which can it, also increase the wages, but without really giving target. It is not necessary that the spiral engages, but it is necessary all the same that there is an aid on the wages. For now, 71% of branches today have minima below the minimum wage.