–Government Eyeing 2% Minimum Wage Increase: Press

PARIS (MNI) – French monthly base salaries rose 0.9% in 1Q and
hourly wages were up 1.0% after 4Q gains of 0.3% for both, the Labor
Ministry said Friday, confirming its initial estimates.

Annual base pay gains slowed from 2.3% to 2.2% for salaries and
were steady at 2.3% for wages.

Nominal pay increases tend to be larger at the start of the year
and the 1Q gains also reflect a catch-up with high inflation rates,
which had been undermining real purchasing power. The pick-up in wages
follows a back-to-back hike in the minimum wage by 2.1% in December and
another 0.3% in January.

As consumer prices (excluding tobacco) rose by 0.9% over the course
of 1Q, real base pay gains were negligible both on the quarter and the
year.

Last month the European Commission projected a slowdown in
full-year pay gains from 2.8% last year to 2.1% this year and 2.0% next
year, reflecting its forecast for a half-point rise in the jobless rate
this year and another 0.1-point increase next year.

However, future pay gains at the low end could prove somewhat
stronger, as the new government is eyeing a hike in the minimum wage of
1.5% to 2.5% this summer, the business daily Les Echos reported Friday,
The range reflects the government’s dilemma of fulfilling a campaign
promise of President Francois Hollande without further undermining the
cost-competitiveness of domestic producers.

If, as the newspaper reports, the final decision to be announced
Tuesday is likely to be for a minimum wage hike of around 2%, a large
part would be merely an advance on the regular adjustment for inflation
that will come next January. As consumer prices have already risen by
1.4% since the previous adjustment, the extra boost now would amount to
only 0.6%.

While such a hike would be too modest in the view of most union
leaders, one advisor to Labor Minister Michel Sapin has estimated that
the E27 monthly increase in the monthly minimum wage this would
represent could potentially cause job losses of 30,000 to 50,000, Les
Echos said.

Hollande had also pledged to add an economic growth increment
equivalent to half the real income gains of salaried workers to
cost-of-living adjustments in the minimum wage in the future.

With production slowing, the rise in French unit labor costs could
accelerate to 2.1% this year (+0.6% in real terms), then slow to 1.1%
next year (-0.6%) as the business cycle turns around, the Commission
forecast.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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