France has become the country of wage austerity

According to Eurostat figures, France is one of the European countries where the cost of labor is increasing the slowest. 

Finished this image of cicada and the 35 hours, France has become the country of austerity. Eurostat published this week the figures on the evolution of the cost of labor, in the 27 countries of the Union and France is at the bottom of the table, with an increase of barely 0.9%. By way of comparison, in Germany, the cost of labor rose by 4.3% and in the Netherlands by 5.1%. 

How to explain this wage moderation? Is it suffered or voluntary? 

Both. There is indeed, a part suffered. In France, wages do not progress much because there is a lot of unemployment, and therefore this stifles wage demands. While in the Netherlands or Germany, we were (before the epidemic) at full employment, and therefore the bosses are obliged to take out the check book to hire. 

And then, the other reason which explains this moderation in wages, it is indeed a deliberate policy, initiated under François Hollande, which aims to contain the cost of labor, in the name of competitiveness. It is true that when added wages and charges, France was - and remains elsewhere - one of the most expensive countries in Europe. As a result, companies have relocated. And so, François Hollande then Emmanuel Macron embarked on policies to lower the cost of labor, policies which are now bearing fruit.

If we go to the end of this logic, to keep our jobs, we would have to lower the cost of labor even more, and therefore lower wages. It’s endless.

This is the limit of this policy. Today, roughly speaking, the cost of labor, in France and Germany, is the same, around 35 euros an hour (wages + charges). But, in Romania, we are at six euros an hour, six times less! So, indeed, it is a fight lost in advance: a French employee will always be more expensive than a Romanian employee. 

So to get by, you have to bet on quality. This is the German strategy: we buy German cars, not because they are cheap, but because they are of quality. Of course, this requires going upmarket, being innovative. But, this is the key to reindustrializing the country. It is a two-sided strategy. On the one hand, you have to control the cost of labor to be competitive in terms of price. And on the other hand, you have to go upmarket to be attractive in terms of product. It makes a good product at the right price. And there you are unbeatable.