2023-12-29 08:39:50
Published on Dec 29 2023 at 7:13Updated Dec 29 2023 at 9:39
How can we reconcile the quest for full employment, improving the competitiveness of businesses and increasing the purchasing power of employees paid at the minimum wage level? One of the solutions involves an examination, necessary but politically risky, of the articulation – that is to say the crossed effects – between remuneration, labor costs and socio-fiscal aid.
This is the challenge of the mission that Matignon entrusted at the end of November to two economists, Antoine Bozio, director of the Institute of Public Policies (IPP), and Etienne Wasmer, professor at New York University Abu Dhabi. It is up to this mission, announced during the social conference of October 16, to resolve a question: the coupling between thresholds for exemption from employer and employee contributions on the one hand, and public aid on the other hand, prevents Can low wages progress?
More or less significant effects on employment
As a reminder, there are three thresholds for reducing contributions: the decreasing reduction up to 1.6 SMIC (Fillon reduction), the reduction of 6 points in health contributions (health band) up to 2.5 SMIC, and 1.8 points of family contributions up to 3.5 SMIC (family band). All these exemptions represented 74 billion euros in 2022, recalls a report by deputies Marc Ferracci (Renaissance) and Jérôme Guedj (socialist).
If the effects of the first tranche (up to 1.6 SMIC) on employment are massive, they are doubted for the second (between 1.6 and 2.5), and judged to be zero for the third (2 .5 to 3.5). Consequently, the deputies decided to reduce the family band to between 2.5 and 3.5 SMIC in the 2024 Social Security budget.
Will other adjustments take place in the second tranche, if exemptions are deemed ineffective? Possible. However, there is no question of cutting back in the first tranche, given the sensitivity, at this level, of the slightest increase in labor costs on hiring.
Economists converge to reject any low-wage trap effect which would block employees just below the threshold of 1.6 SMIC. However, the slope effects (i.e. reduction in exemptions as we approach this threshold) can be improved.
483 euros for 100 euros more
In certain cases, in fact, the employer and his employee may have an interest in not agreeing on an increase: the first suffering a sharp increase in costs, while the second loses too much in activity bonus (including the threshold exit is 1.5 SMIC) and becomes eligible for income tax. Both parties may prefer to go through a Macron bonus or overtime.
“At these salary levels, increasing disposable income by 100 euros may require increasing labor costs by 483 euros for a single person without children,” illustrates the mission letter. A solution may involve a “softening” of the slope of the exemptions up to 1.6 SMIC and a tightening beyond that, with part of the savings improving the activity bonus.
SMIC indexed to branch minimums
It is therefore the very complex “socio-fiscal” pipework that leads from the pay slip to disposable income that the Bozio-Wasmer mission will have to assess, walking on eggshells: changing a parameter can make a lot of people unhappy, what’s more is aimed at a sensitive audience.
First, argues Marc Ferracci, the wage formation mechanism must be reformed. Firstly, index the minimum wage on an average minimum of professional branches, as proposed by the independent group of experts on the minimum wage. Secondly, allow small or young companies to deviate from a sector agreement and, to do so, strengthen the negotiating power of their employees.
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