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ORIGINAL FRENCH ARTICLE: Une hausse du Smic profite à tous les salariés

by Clotilde Mathieu

All Workers Benefit From Minimum Wage Hike

Translated Wednesday 7 November 2012, by Gene Zbikowski and reviewed by Henry Crapo

The economists at the French statistics bureau have just demonstrated that "all workers benefit from a minimum wage hike" in the latest number of the journal Economie et Statistiques. This invalidates free-trade propaganda.

After five years of hard times, nearly 3 million workers expect change. Breaking with Nicolas Sarkozy’s policy, the Ayrault government finally announced a boost … of 0.6% for French workers earning the minimum wage. The hike is ridiculous but is considered to be “reasonable” in view of the “economic situation,” according to the Minister for Labor, Michel Sapin.

How would an increase in the minimum wage endanger an economy whose driving force remains consumption? While the study by the French statistics bureau INSEE, which appeared last week, does not answer this question, it kills the idea that “the middle classes feel that the bottom end of the wage scale is catching up to them,” because an increase in the minimum wage supposedly does not push up wages for other workers.

The authors of the study explain that this feeling is reinforced by the fact that, in the first half of the 1990s, top incomes rose a lot, whereas labor’s share in surplus value stagnated. The rise in inequality and slow growth in wages are therefore to blame for this feeling.

Unlike other studies done on this subject, the INSEE economists did not work on the immediate effect of an increase in the minimum wage, but on the period following the creation of an inflation-adjusted minimum wage in 1970. This dynamic analysis leads to new conclusions. Whereas until now the effect on the average wage was thought to be nil, in reality the effect is “progressive” and “quite significant” in the mid-term.

The increase is calculated in two ways: as indexed against the inflation observed in the previous year; and at one-half the increase in hourly purchasing power earned by the ordinary worker, that is, the government’s much-discussed boost.

For the analysts, while the influence on the average wage is close to zero in the short term, the coefficient increases and approaches 0.3 percent in the mid-term. In other words, when the minimum wage increases by 1%, the average wage increases by 0.3%. The economists have also tried to measure the impact of a minimum wage hike when the average wage is indexed against inflation. In this case, the boosting effect increases to 0.74 percent.

Unfortunately, the authors, in harmony with the government, do not conclude that a steep increase in the minimum wage can have a dynamic effect on all wages. Instead, they conclude with a warning of the risks a wage hike may pose to competitiveness… This is another question, whose discussion seems to be getting off to a bad start.

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