what does this formula from Gabriel Attal mean?

During his general policy declaration, the Prime Minister announced a “de-micardization” project, without defining its contours. Behind this neologism, several avenues for reform are presented to the government.

“I assume to say it, we must de-emcardise France”launched Gabriel Attal at the National Assembly, Tuesday January 30, during his general policy declaration. “We cannot accept a France where many are condemned to remain close to the minimum wage their entire career”, insisted the new Prime Minister. Behind this neologism of “de-micardization”, many wonder about the government’s intentions. “I didn’t understand at all”reacted on franceinfo François Hommeril, president of the CFE-CGC, the executives’ union.

“De-micardization, ok, but what does that mean in concrete terms? ?”asks Franceinfo an elected official from the left wing of the macronie. “It’s about paying people better, includes a Renaissance MP. But I don’t see what Gabriel Attal is proposing, he hasn’t made any announcements on this subject.” Coming to provide after-sales service, the new Minister of Labor, Catherine Vautrin, assured Wednesday on BFMTV that the project was in any case not to eliminate the minimum wage. “The desire today is to allow our fellow citizens to progress. Who doesn’t want, as soon as they work, to see their income increase? The subject is to help show that work generates income”she pleaded.

A context of high inflation

Concretely, according to Gabriel Attal, it is first a question of acting so that professional branches which continue to pay below the minimum wage “these remunerations go up again”. More than a hundred professions are affected, according to the Minister of Labor. The Prime Minister assured that he did not exclude “no action” to achieve rapid results. To rectify the situation in these branches, Catherine Vautrin wants to rely on “a European provision which has been voted on” and which must be transposed in 2026.

In addition to these cases, the share of employees on the minimum wage in France is increasing. According to Dares figures, it reached a record of 17.3% in 2023 (after 12% in 2021 and 14.5% in 2022). In a context of inflationary crisis, this is explained by the successive increases in the minimum wage, which remains indexed to price increases. To summarize, employees paid the minimum wage have made up for part of the low wages which were slightly above the minimum wage. At the same time, companies, encouraged by the government, preferred to give bonuses rather than increase low wages.

“It’s cyclical, so it won’t necessarily last”explains Eric Heyer, labor market specialist at the OFCE (French Observatory of Economic Conditions). “When we give the figure of 17% of minimum wage, this does not take into account the level of bonuses paid by companies, but only the basic salary. Tomorrow, won’t companies transform these bonuses into salaries?”asks the economist.

Avoiding low-wage traps

But there is also a more structural factor which locks some employees into low-wage traps. This is a “system which has led us (…) for decades to concentrate our aid, our exemptions, at the level of the minimum wage”explained Gabriel Attal before the National Assembly, before taking a concrete example: “Today, to increase the income of an employee on the minimum wage by 100 euros, the employer will have to pay 238 euros more.”

“As for the employee, he loses 39 euros of activity bonus, he sees his CSG and his social security contributions increase by 26% and he is subject to income tax.”

Gabriel Attal

during its general policy declaration

“There is almost no interest for anyone in increasing an employee’s minimum wage”, according to the observation made by the head of government. As Emmanuel Macron had already done during his press conference, Gabriel Attal here points out the threshold effects, linked to reductions in contributions, which are stronger at the level of the minimum wage. “These reductions are decreasing up to 1.6 times the minimum wage, and after this threshold, you no longer have aid. So systematically, when an employer increases his employee, he loses aid”, summarizes Eric Heyer. It is therefore against this phenomenon that the government wishes to act.

“But be careful: the term ‘discarding’ can be misinterpretedwarns the economist. We can understand it as impoverishment, when in reality, we have a minimum wage which is increasing quickly to prevent minimum wage earners from losing purchasing power. In other countries, we are not increasing the minimum wage as quickly and we are experiencing impoverishment. Then, there is still a feeling of significant downgrading for certain employees, who have worked for ten or fifteen years and who find themselves caught up in the minimum wage.”

Towards a deindexation of the minimum wage?

The problem is not new and has even already been targeted by Elisabeth Borne. In the fall, the former Prime Minister entrusted two economists, Antoine Bozio and Etienne Wasmer, with the mission of studying the relationship between salaries and tax incentives in order to “that work pays better”. The report expected at the beginning of the summer should make it possible to move forward with solutions, in particular to avoid these famous low-wage traps. There are different avenues in this area. The first is to focus on an increase in wages, thanks to productivity. “When an employee is more productive, generally, salaries are increased based on their productivity”, recalls Eric Heyer. But Gabriel Attal has not announced anything in this sense: neither training plans nor investments for companies.

Another avenue: it is possible to play on reductions in charges on low salaries, by modifying the progressiveness of aid. Eric Heyer calls for softening the reduction in these reductions. “We lose help too quickly, it needs to be flatter“, he suggests. The government could, for example, decide to maintain the same level of aid up to 1.6 times the minimum wage. “But this solution is expensive, around 20 to 25 billion euros”, warns the OFCE economist. A hole that would have to be financed either through a deficit or by compensating for it, for example via an increase in the CSG (generalized social contribution), a very broad-based tax that retirees and annuitants also pay.

This solution was proposed by Eric Heyer during his hearing by the two economists responsible for the report.

“For an employer, it would cost less to hire. And for an employee, the reduction in contributions will be greater than the increase in the CSG.”

Eric Heyer, economist at the OFCE

at franceinfo

Still, this option could provoke a new front of anger among retirees.

Last avenue considered: no longer automatically index the minimum wage to inflation. Renaissance MP Marc Ferracci, responsible for thinking about Act II of the growth law (known as the “Macron law”), also proposed this solution. “This indexation may prove too burdensome for companies, particularly younger ones. This also produces a flattening of salary scales”develops the deputy in the economic magazine Challenges. He therefore proposes to “give back to the social partners the ability to decide on salary increases”. According to Eric Heyer, this is the “worst” solution, because it would take the risk of creating “poverty traps”. Gabriel Attal will now have to decide to make his “de-cardiardization” project a reality.