France : Boosting Wages Through Productivity Gain

- October 2023

28/11/2023

Olivier REDOULES

In France, compared to 2019, wages in the private sector have grown less robustly than consumer prices, despite the marked acceleration seen in 2022, which particularly supported lower wages. However, this loss in purchasing power of wages does not reflect, for the economy as a whole, a distortion in the added value distribution to the detriment of employees.

The main explanation for this paradox lies in the decrease in average hourly labor productivity, of around 5% since 2019. It couldresult, for about 80%, from the evolution of the workforce composition, under the effect of massive job creations that took place mainly in relatively less productive sectors, while benefiting relatively less qualified profiles (including apprentices). Moreover, several sectors are facing productivity losses linked to significant transformations in their activity, notably related to the ecological transition, the energy crisis, and the evolution of their global markets.

A second explanatory factor relates to the origin of inflation, a shock of imported prices that spread very quickly into consumer prices, and more slowly into he added value of companies, some sectors having limited margins to increase their prices and, as a result, wages.

The differentiated wage developments between sectors and companies create an incentive for employees to increase their professional mobility. The dynamic of reallocating workers towards more productive companies is a powerful lever for productivity gains for the economy, and thus for purchasing power. It can be encouraged by social dialogue at the sector and company levels.

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