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“Reasonable Increase” in Minimum Wage To Be Very Limited

Translated Friday 29 June 2012, by Gene Zbikowski and reviewed by Derek Hanson

The Prime Minister’s office has not denied the 2% rise in the minimum wage mentioned in Les Echos newspaper on June 22. It just indicated there would be a “reasonable” increase from July 1. This does not reassure the trade unions.

Prime Minister Jean-Marc Ayrault’s inner circle indicated on the morning of June 22 that a technical meeting on the subject, which was planned for late in the morning at the Prime Minister’s residence, had been canceled because it coincided with the meeting of the Council of Ministers. “But this won’t prevent the discussions from continuing,” they added. The above-inflation rise in the minimum wage, a much-awaited promise made by François Hollande, is to be revealed on June 26 to labor and management at the meeting of the national commission on collective bargaining. A decree will be published on June 27 so that the increase will come into force from July for the concerned workers, who represent about 10% of the active population.

Pressure from the employers

Behind the scenes, the employers are increasing their pressure to limit the increase in the minimum wage at all costs. On June 21, the CGPME demanded “suspension of the above-inflation increase that has been envisaged,” arguing that it would “endanger” thousands of small enterprises. Even a weak above-inflation increase will create “a serious risk for employment,” the president of the MEDEF, Laurence Parisot, stated.

The hypothesis of a 2% increase, formulated by Les Echos newspaper, would be in line with what the bosses’ representatives want, because the mini-increase would be a load of eyewash. The increase would, in large part, be an advance on the future legally-imposed adjustment, which is due on January 1, to make up for the inflation registered since the previous increase and which amounts to 1.4%. The true “above-inflation increase” would thus be 0.6%, according to Les Echos.

Disappointment for the employees in sight

The government has already warned that the above-inflation increase will be limited so as not to jeopardize the competitiveness of companies, at the risk of disappointing the employees and of vexing the employers, just the same. The last increase over and above the mechanical adjustment according to inflation and the blue-collar starting wage dates from 2006, and it was minimal (a 0.3% hike). President François Hollande promised to “make up what was not granted” during Nicolas Sarkozy’s five-year term as president, but nothing more, and not right away.

The minimum wage is 9.22 euros an hour, that is a gross monthly wage of 1,398.37 euros for a 35-hour work week. A 1% increase would mean a net increase of 11 euros a month for a full-time employee.

Torn between the problems in making ends meet faced by employees earning the minimum wage and the need to avoid inflicting too high a cost shock, notably to small companies, the government seems to have decided in favor of the SMEs, and this, all the more so as an increase in the minimum wage means a cost to the government. Indeed, any increase results in an increase in the amount that the government must pay into social security to make up for the contributions which low-wage workers are exempted from making. The government will also have to adjust the lowest wages paid to civil servants.

25,000 fewer jobs

According to the experts, the cost of a 1% hike in the minimum wage is somewhere between a few hundred million euros and a billion euros. When asked, the concerned ministries did not furnish an estimate. The Ministry of Labor recognized that “we aren’t in a context that’s going to make it possible to meet everyone’s hopes.”

Another bad sign is that the group of five “experts” who were charged with examining the subject has come out against a tangible above-inflation increase. These five economists, who have opposed an increase in the minimum wage every year since 2009, believe, according to one of them, Francis Kramarz, that a 1% rise would lead to the shedding of 1.5% of the minimum-wage jobs, that is around 25,000 jobs.

The trade unions are worried.

Jean-Claude Mailly, the leader of FO, is demanding an increase of over 200 euros in the minimum wage, spread out over the next five years. On June 21 he repeated that an increase that “has a meaning” and “takes the rise in prices into account” will have to amount to “around 5%.” For its part, the CGT is demanding a 300-euro increase. The increase will not even come close to that, according to initial leaks published in the press.

In addition to the above-inflation increase, the government intends to initiate a debate on the rules governing adjustments to the minimum wage at the social conference on July 9 and 10. Another round table will be devoted to the means of preventing workers from remaining on the minimum wage for their whole working life.

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