Wages are both more dynamic and more widely dispersed in Germany than in France

Various indicators can be used (figure 1) to compare wage dynamics in France and Germany. All of them converge towards a common finding: compared with France, wages in Germany increased at a more moderate rate from 2000 to 2007, at a similar pace from 2008 to 2011, then more strongly since 2012. The change in Germany was affected mainly by the implementation of the Ouvrir dans un nouvel ongletHartz reforms between 2003 and 2005. These resulted in strong wage moderation in Germany from 2003 onwards. Wage negotiations subsequently contributed to higher wage rises.

One of the first indicators is gross hourly wage. Between 2000 and 2007, in the non-farm market sector (except services to households), it increased by 2.1% per year on average in Germany, against 3.3% in France, according to the Ouvrir dans un nouvel ongletLabour Cost Index – wages and salaries which covers all forms of employment (including mini-jobs and apprenticeships). From 2008 to 2011, annual growth was very similar. From 2012 to 2015, the average rise was 2.3% in Germany and 1.8% in France.

Differences in either direction are even more marked when gross average wage per capita is considered. This indicator is derived from the national accounts, and includes all types of pay (bonuses, overtime payments, etc.) and the percentage of time employees work, and it confirms this observation. From 2012 to 2015, the average wage per capita increased by 1.4% on an average annual basis in France, against 2.7% in Germany. Other frequently used indicators also confirm this observation. The basic monthly wage slowed in France (+1.6% on average from 2012 to 2015 against +2.5% between 2000 and 2007), whereas in Germany the index of agreed earnings accelerated (+2.7% per year between 2012 and 2015 against +2.0% between 2000 and 2007).

The measure of gross wages only can be supplemented by comparing the labour cost, which in addition to wages, includes associated contributions (taxes paid minus subsidies based on wages,employer social contributions, training). Since 2012, the Ouvrir dans un nouvel ongletLabour Cost Index – total labour cost in France has slowed significantly more than the Ouvrir dans un nouvel ongletLabour Cost Index - wages and salaries: it increased by 1.2% on average per year compared with 3.4% between 2000 and 2007. The tax credit for encouraging competitiveness and jobs (CICE) and measures in the Responsibility and Solidarity Pact to reduce employer contributions have played a major part in this slowdown.

From one industry to another, the dispersion of average hourly gross wages is greater in Germany than in France among enterprises of 10 or more employees, according to the Ouvrir dans un nouvel ongletStructure of Earnings Survey. For example, in 2014 the average hourly wage in Germany varied from 9.8 euros in accommodation and food services to 27.4 euros in energy production and distribution, i.e. almost three times as much (figure 2). This hierarchy of industries is also found in France, but is less pronounced: the average gross hourly wage in accommodation and food services (13.0 euros) is around half that in the production and distribution of energy (24.1 euros). In addition, between 2010 and 2014, while the wage range narrowed in France, it widened slightly in Germany over the same period.

The dispersion of gross hourly wages is also greater in Germany according to type of contract (figure 3). German employees with fixed-term contracts earn on average 34% less than those with open-ended contracts, whereas this gap is 24% in France. Overall, employees on open-ended contracts are better paid in Germany than in France (19.5 euros on average against 18.3 euros); the reverse is true for fixed-term contracts.

Gross hourly wages by group of occupations are similar, on average, in the two countries but are nevertheless more dispersed in Germany than in France. In 2014, the wages of managers and professionals were 1.9 times higher than the average German wage, against 1.6 times higher in France (figure 4). In contrast, low-skilled, or elementary occupations earned around 50% of the average wage in Germany, compared with 70% in France. While this ratio has remained stable in France, it has decreased in Germany (70% in 2006).

On 1^st January 2015, in order to limit wage disparities which were tending to increase, the German government introduced a minimum gross fixed hourly wage of 8.5 euros. This measure did not have any clear impact on wages immediately. Indeed, in many collective agreements standard minimum wages of more than 8.5 euros were already applied. In other branches, only employees not covered by a collective agreement were concerned by this measure at the beginning of 2015, as many industries had arranged to delay implementation until the end of 2016. Ultimately, the creation of a minimum wage could help reduce wage disparities in Germany.