How to reconcile the French with the statistics on purchasing power?

• The increase in “average” purchasing power observed in recent years is not reflected in the polls.

• The usual measurement of this indicator does not, in fact, make it possible to take into account the various situations of households.

• But several adjustments allow us to remedy this in part.

It is "the" economic theme that comes back in force in each presidential election.

It is of course a question of “purchasing power”, which each candidate promises to preserve, even to increase.

According to a poll carried out at the end of September by Elabe for BFMTV, this is also the main concern of the French to make their choice in the future election.

It is therefore not surprising that each study on purchasing power is extensively discussed and criticized, and that each side interprets it to its advantage.

Latest debate: the evaluation carried out on Tuesday by the Institute for Public Policy (IPP).

She believes that purchasing power has increased overall during the five-year term of Emmanuel Macron, but that it is especially the very rich who have benefited from it.

For its part, the executive highlights the assessment from the Treasury Department, which shows, on the contrary, that it is the purchasing power of the poorest that has increased the most (in percentage) over the period. .

A "simple" definition ...

If the two studies reach different conclusions on the main "winners", they agree on the other hand on one observation: the increase in purchasing power is real for a large part of the population. However, these conclusions based on statistics differ greatly from the “feelings” of the French. At the end of September, a survey showed that 56% of them believed that their purchasing power had fallen since 2017.

How to explain this apparent paradox?

By delving into the way the indicator is "constructed".

The “purchasing power”, which corresponds to the quantity of goods and services that one can buy with a given income, is calculated from the gross disposable income of households (after taxes and contributions) and the index of price.

If incomes rise faster than prices, purchasing power increases.

If income goes up less quickly, it goes down.

… Which can be refined by household

This is where a first limit appears: as INSEE explains, “purchasing power is a macroeconomic quantity”.

In other words, it is a global measure, which is not intended to reflect the diversity of situations, which can lead to the feeling of being out of step with “real life”.

Fortunately, several methods exist to refine the analysis.

One is to divide disposable income by the number of people in the household.

We then speak of consumption units (CU).

Thus, a single person counts as 1 CU, then 0.5 CU is added per “adult” (over 14 years old for INSEE) and 0.3 CU per additional child.

This approach allows statistics "more representative of the composition of households and

closer to the reality of household consumption", assures INSEE.

Thus, in 2020, “average” purchasing power increased by 0.4%, while it stagnated (0%) if we take consumption units into account (see graph below).

Evolution of purchasing power between 2010 and 2020 by

... Or by taking into account other expenses

This consideration of the diversity of households makes it possible to “temper” the increase in purchasing power, but this remains an increase in spite of everything.

So how can we get even closer to the feeling of "decline" felt by the population?

Perhaps by taking into account another indicator: “pre-committed” expenses.

INSEE defines them as expenses "difficult to renegotiate in the short term": rent, loan repayment, water and heating bills, insurance, telephone subscriptions or even the children's canteen.

When these expenses are subtracted from disposable income, we obtain “arbitrable income”.

It makes it possible to estimate "the budget over which the household really has control, including in the short term", indicates France Strategy in a note published in August.

However, the share of this “arbitrable income” is tending to decrease, because “pre-committed” expenses have increased sharply over the past twenty years.

According to France Stratégie, they represented 32% of total household spending in 2017, against 27% in 2001. And depending on household wealth, the disparities are very strong.

Heavier “pre-committed” expenses among the poorest

Thus, among poor households (less than 1,025 euros of income per month for a single person), the proportion of “pre-committed” expenses jumped by 10 points between 2001 and 2017 (from 31 to 41% of total income), mainly because of the increase in rents and charges.

Among modest households (between 1,025 and 1,526 euros of income for a single person), the share of these expenses increased by 7 points.

On the other hand, among wealthy households (more than 2,280 euros per month), the charge has increased by only 3 points.

Share of pre-committed expenses in the total expense (2017) by

The consequence is therefore that the possible increase in income is "eaten away" by these ever higher expenses, especially among the most modest.

This can contribute to the feeling that purchasing power is not really improving.

Do not suffer from a "feeling of downgrading"

Two other factors can also play on the “feeling” of purchasing power, in a more subtle way. First, as the chief economist of the Treasury, Agnès Benassy-Quéré, reminds us in a blog post, households have “a particular aversion to [financial] losses. If a public policy combines, as is the case over the period 2018-2022, measures favorable to disposable income (gradual abolition of the housing tax, increase in the activity premium, etc.) and unfavorable measures ( reinforcement of tobacco taxation, reform of housing assistance), it is possible that the unfavorable measures are more weighted [understand visible], in the minds of households, than the favorable measures ”. Or, as Emmanuel Macron summed it up in his own way: “In France, we look at the penny we lose,never the one we win! ".

In France, we look at the penny we lose, never the one we win!

pic.twitter.com/ZmTDSX4DaH

- Emmanuel Macron (@EmmanuelMacron) April 18, 2018

There is also, according to Didier Blanchet, of INSEE, “a chase between purchasing power and consumption standards”.

The company is in fact constantly creating new needs - ever more powerful computers, new phones each year - which push consumers to equip themselves more and more so as not to suffer "a feeling of downgrading", as Didier Blanchet assures us. .

Even if it means cutting back on the purchasing power dearly acquired.

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• INSEE

• Yellow vests

• Emmanuel Macron

• Purchasing power

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