Informations Rapides · 15 December 2021 · n° 321

In Q3 2021, labour cost index - wages and salaries was almost stable, total labour cost index decreased by 0.3% Labor cost index in industry, construction and services - third quarter 2021

In the third quarter of 2021, the payroll and the number of hours paid by employers increased in a similar way compared to the previous quarter. These increases were the result of a clear upturn in economic activity, attributable to the lifting of health-related restrictions (lifting of the curfew, reopening of cafés-restaurants, etc.) at the end of the spring, the effects of which in terms of full quarters were only measured in the summer.

From the first quarter of 2020, 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 legal compensation (70% of gross wage, being approximately 84% of net salary, within the limit of 4.5 times the minimal wage) was refunded at 100% by the government before this share was gradually reduced from June 2020. As of 1 July 2021, except in special situations (protected sectors or administratively closed establishments), short-time working compensation has been lowered to 60% of gross wage and its refund by the public authorities has been reduced to 60% (i.e. 36% of gross wage). The labour cost index 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 compensation not covered by the government as of June 2020 is included in the labour cost index.

In addition, various labour cost reduction measures are taken into account in the labour cost index and contribute to its variations until the third 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 January 2020 to the end of March 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.

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 third quarter of 2021, the labour cost index (LCI) - wages and salaries in the non-farm business sector was almost stable compared to the previous quarter: -0.1% quarter on quarter, as in the second quarter of 2021 (seasonally and trading days adjusted data). The increase in the number of hours paid was thus only slightly higher than the increase in the payroll.

Year-on-year, the LCI – wages and salaries increased markedly in the third quarter of 2021: +1.4% compared to the third quarter of 2020, after a decrease of 2.4% in the previous quarter. The hourly wages thus recovered a trajectory closer to that of the pre-crisis period (+4,5% compared to Q4 2019), after strong variations linked to the use of short-time working. During the periods with health-related restrictions, mainly during the spring of 2020, the use of 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 average hourly wages had been mechanically increased.

In the third quarter, the average working time per employee continued to increase: +1.9% over one year, after already a sharp rise of 18.6% in the second quarter of 2021 due to a fall of worked hours during the first lockdown in spring 2020.

In the third quarter of 2021, hourly wages increased in industry (+0.7% quarter-on-quarter after –0.9%) and, more significantly, in construction (+2.2% after -0.5%); at the opposite, they decreased in services (-0.7% after +0.1%). In services, these evolutions cover heterogeneous situations by detailed activities: further decline in accommodation and food service activities (-1.4% after -3.5%) but acceleration in transport and storage (+2.0% after +0.5%).

Compared to the previous estimation of 15th September 2021, the quarter-on-quarter variations of LCI – wages and salaries in Q2 2021 has been revised upwards by 0.3 percentage points; the year-on-year variation has been revised upwards by 0.1 percentage points.

In the third quarter of 2021, the totallabour cost index (LCI) in the non-farm business sector fell moderately: -0.3% quarter-on-quarter after a fall of the same magnitude in the second quarter. This slight difference in terms of variation with the LCI –wages and salaries during the third quarter was mainly explained by the special bonus for purchasing power, which is not subject to social security contributions, after the renewal of the scheme confirmed in the amended Finance Act of 19 July 2021. In the accommodation and food services sector, the difference between the evolution of the total labour cost index (+3.7%) and LCI –wages and salaries (-1.4%) was mainly the result of a sharp reduction in exemptions or facilitated payment of social contributions.

Over a year, the total LCI increased by 1.0% in the third quarter of 2021, whereas it had fallen by 2.7% in the previous quarter, due in particular to fluctuations in the LCI – wages and salaries. In total, it was 3.9% higher than in the fourth quarter of 2019.

Compared to the previous estimation of 15th September 2021, the Q2 2021 quarter-on-quarter variation in total labour cost index in the non-farm business sector has been revised upwards by 0.3 percentage points; the year-on-year change has been revised downwards by 0.1 percentage points.