Informations Rapides · 15 September 2021

In Q2 2021, labour cost index – wages and salaries decreased by 0.4% and total labour cost index by 0.6% Labor cost index in industry, construction and services - second quarter 2021

In the second quarter of 2021, the payroll and the number of hours paid by employers increased moderately compared to the previous quarter, in line with the revival of activity. While the beginning of the quarter was marked by the continuation of health-related restrictions in April, there followed a gradual easing of restrictions in May and again in June (reduced curfew, reopening of cafés and restaurants, etc.). This resulted in a revival of activity, particularly in the sectors that were sharply affected by the health crisis, such as accommodation and food service activities.

In the previous five quarters, the payroll and the number of hours paid by employers had varied considerably, due to health crisis and an extensive use of short-time working compensation. This measure led to the substitution of compensation, which is not considered as wages, for part of the wages. Short-time working compensation requests can be done with some months of delay. Since the health crisis emergence, estimations are more likely than usual to be revised, especially in sectors with an extensive use of short-time working.

The short-time working system existed before the health crisis but the government strengthened it when this crisis emerged: from March to May 2020, the government fully refunded the legal compensation (70% of gross wage within the limit of 4.5 times the minimal wage). From June 2020, the legal indemnity remained fixed at 70% of the gross wage, but, with a few exceptions, the government only covers 60% (and even 52% from June 2021). The labour cost indices measuring only the cost supported by employers for the employment of their employees, the hours compensated for short-time working and the corresponding compensations paid to the employees are not taken into account. On the other hand, the portion of short-time working allowance not covered by the government as of June 2020 is included in the labour cost.

In addition, various labour cost reduction measures are taken into account in the labour cost index and contribute to its variations until the second quarter of 2021.

First, the special bonus for purchasing power passed by French Parliament in late December 2018 has been renewed in 2020 and 2021: the original system planned that only firms having signed a profit-sharing deal could pay up to 1’000€ free of any tax, to employees whose wage was lower than 3 times the minimal wage. With the health crisis, the government has allowed all firms to pay this bonus from 2020 to 2022 and has raised the threshold to 2,000€ for firms having signed a profit-sharing deal.

Next, the plan to support the tourism sector decided on May 2020 provides for exemptions from employers’ social security contributions and assistance with the payment of contributions for the firms with fewer than 250 employees in some sectors, especially concentrated in trade, accommodation and food services and administrative and support service activities (list extended in October 2020). These measures are taken into account in the total labour cost index, amounting to 2.4 billion euros over the year 2020 and almost 950 million euros for the first two quarters of 2021.

Last, the “1 young person 1 solution” plan, launched at the end of July 2020 and extended until June 2022, provides under certain conditions for a premium, up to 4’000€, to the employers hiring a young worker under 26 years of age. It also provides for an exceptional assistance when hiring a young worker with a sandwich course contract, up to 8’000€ if the worker is older than 18 years old and up to 5’000€ otherwise.

In the second quarter of 2021, the labour cost index (LCI) - wages and salaries in the non-farm business sector fell compared to the previous quarter: -0.4% quarter on quarter, following a rise of the same magnitude in the first quarter of 2021 (seasonally and trading days adjusted data). This decline was due to a slightly higher increase in the number of hours paid than in the payroll. The increase in the volume of work is a sign of the return to activity in the most affected sectors by the health-related restrictions, in particular in accommodation and food service activities.

Year-on-year, the LCI – wages and salaries fell sharply in the second quarter of 2021: - 2.5% compared to the second quarter of 2020, after an increase of + 2.8% in the previous quarter. This decline reflects the fall of the number of short-time working compensation requests in the second quarter of 2021, compared to the same period in 2020: a year earlier, short-time working concerned more clerical, sales and services employees and industrial and blue – collar workers, who are on average the lowest-paid employees, and hourly wages were mechanically increased.

The average working time per employee increased by 18.8% over one year. This sharp increase in the number of hours paid is the counterpart of the unprecedented drop observed a year earlier, when the first lockdown was introduced in the spring of 2020, as a result of the massive use of short-time working.

In the second quarter of 2021, hourly wages decreased significantly in industry (-0.9% quarter-on-quarter after +1.0%) and in construction (-0.6% after -1.1%) and more slightly in services (-0.2% after +0.5%). These evolutions cover heterogeneous situations by detailed activities, in particular in services: strong decline in accommodation and food service activities (-3.8% after +1.5%) and finance- insurance activities (-2.0% after +3.3%) and, on the contrary, rebound in administrative and support service activities (+2.2% after -1.9%).

Compared to the previous estimation of 16th June 2021, the quarter-on-quarter and year-on-year variations of LCI – wages and salaries in Q1 2021 are unchanged.

In the second quarter of 2021, the labour cost index (LCI) in the non-farm business sector fell slightly more than the LCI – wages and salaries: -0.6% quarter-on-quarter after +0.8% in the first quarter.

Over a year, the total LCI fell by 2.6% in the second quarter of 2021, whereas it had risen by the same proportion in the first quarter, due in particular to fluctuations in the LCI – wages and salaries.

Compared to the previous estimation of 16th June 2021, the Q1 2021 quarter-on-quarter variation in total labour cost index in the non-farm business sector is unchanged; the year-on-year change is increased by 0.1 percentage points.