Informations Rapides · 18 March 2022 · n° 67

In Q4 2021, labour cost index - wages and salaries increased by 0.4%, total labour cost index by 0.2% Labor cost index in industry, construction and services - fourth quarter 2021

In the fourth quarter of 2021, the payroll increased sharply compared to the previous quarter, and more than the number of hours paid by employers. These increases were part of the ongoing economic upturn, which has begun at the end of the spring when health-related restrictions have been lifted. Wage growth was also attributable to the resurgence of inflation at the end of the year and the 2.2% minimum wage increase on 1st October 2021.

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 it was strengthened 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 1st 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 and initially paid during the first quarter of 2019 has been renewed twice. The initially renewed 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, all firms were eventually allowed to pay this bonus, a first time in 2020 and a second time from 1st June 2021 to 31st March 2022, with a threshold raised 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 fourth quarter of 2021, the labour cost index (LCI) - wages and salaries in the non-farm business sector increased by 0.4% compared to the previous quarter, after a slight decrease of 0.2% in the previous quarter (seasonally and trading days adjusted data).

Year-on-year, the LCI – wages and salaries increased slightly in the fourth quarter of 2021: +0.2% compared to the fourth quarter of 2020, after a marked increase of 1.4% in the previous quarter. The hourly wages thus recovered a trajectory closer to that of the pre-crisis period (+4.8% 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 fourth quarter of 2021, the use of short-time working by employers was henceforth low in all the sectors. The average number of hours paid per employee surged (+6.0% over one year), offsetting the fall observed during the second lockdown at the end of 2020, and thus nearly returned to its pre-crisis level.

In the fourth quarter of 2021, hourly wages increased in construction (+0.5% quarter-on-quarter after +2.1%) and services (+0.4% after -0.8%) but they levelled off in industry (+0.0% after +0.7%). These evolutions covered heterogeneous situations. At the end of 2021, wages were most dynamic in financial and insurance activities (+1.7% after +0.2%) and in professional, scientific and technical activities (+1.0% after +0.5%).

Compared to the previous estimation of 15th December 2021, the quarter-on-quarter variation of LCI – wages and salaries in Q3 2021 has been revised downwards by 0.1 percentage points; the year-on-year variation remained unchanged.

In the fourth quarter of 2021, the total labour cost index (LCI) in the non-farm business sector rose slightly: +0.2% quarter-on-quarter after -0.3% in the third quarter. The weaker dynamism of the total labour cost index compared to the LCI - wages and salaries in the fourth quarter was mainly explained by the sharp increase in payments of the special bonus for purchasing power at the end of the year (950 million euros in the fourth quarter after 450 million in the third); indeed, this bonus is not subject to social security contributions.

Over a year, the total LCI is steady (+0.0%) in the fourth quarter of 2021, whereas it had increased by 0.9% in the previous quarter, due in particular to fluctuations in the LCI – wages and salaries. In total, it was 4.0% higher than in the fourth quarter of 2019.

The accommodation and food services sector stand out for its very marked and divergent year-on-year trends: the average hourly wage fell by 3.7%, while the total labour cost rose sharply (+5.8%). This disparity in trends is the counterpart of the one observed a year earlier: during the second lockdown at the end of 2020, the extensive use of short-time working in this sector had mechanically increased hourly wages (by composition effects, the lowest paid employees being more removed from the calculation of the average), while the exemptions from employers’ social security contributions and the assistance with the payment of contributions had contained the increase of the labour cost.

Compared to the previous estimation of 15th December 2021, the Q3 2021 quarter-on-quarter variation in total labour cost index in the non-farm business sector remained unchanged; the year-on-year change has been revised downwards by 0.1 percentage points.