for four years, work income has not enriched the French, according to the OFCE

Work may be a ” duty “, according to the Prime Minister, Gabriel Attal, but he hardly pays anymore. The last four years that the French economy has just experienced, punctuated by two major crises, those due to Covid-19 and inflation, have resulted in a growing decoupling between wages and the purchasing power of households. A phenomenon that the French Observatory of Economic Conditions (OFCE) has just highlighted in a note published Thursday February 15.

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Experts from the Institute of Economic Studies summarize the situation as follows: “ Purchasing power is drawn [depuis 2019] by other components of income than salary: it is essentially supported by the dynamism of wealth income first and then tax cuts. On the other hand, social benefits play a negative role on purchasing power, in particular due to indexation lags – for example, retirement pensions were increased on 1er last January, and therefore do not affect the purchasing power of the year 2023 »summarizes Mathieu Plane, one of the four authors of this note, alongside Ombeline Jullien de Pommerol, Raul Sampognaro and Pierre Madec.

This phenomenon has not been seen for more than three decades. And it highlights even more, if necessary, the need to ensure that “ work pays better »as the executive repeatedly repeats.

Exploding cost of living

According to the work of OFCE economists, during the “Covid period”, from 2019 to 2021, purchasing power (reduced per consumption unit, or UC, a measure used to take into account the size of households) increased by 350 euros on average per year. But this 1.8% increase comes mainly from exceptional social benefits put in place through “whatever it costs” (+280 euros), such as partial unemployment for example, and tax cuts (+120 euros). Labor income rather had a negative impact (–30 euros) on purchasing power.

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From 2021 to 2023, the inflationary crisis has changed the trend. Purchasing power then, with an increase of only 10 euros per year per unit, almost stagnated. The reason for this was the weakness of salary increases, while the cost of living exploded; between mid-2021 and 2023, the consumer price index grew by more than 11%. Energy gained 36% and food 21%, while these two items represent around a quarter of total household consumption. And, over this period, labor income contributes 70 euros to the change in purchasing power, while social benefits reduce it by 530 euros.

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