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The Effect of the Minimum Wage on the Average Wage in France (in French)

This study investigates the impact of minimum wage (SMIC) increases on the average wage in France. We use two series of average wage: the average hourly blue-collar wage rate (SHBO) and the average wage per capita (SMPT). We combine these series with aggregate data for the overall economy over four decades from 1970 to 2009, going from the SMIC first implementation (in 1970) to the change in the annual calendar of mandatory increases (in 2009) from the 1st of July to the 1st of January by the law of the 3rd December 2008. We provide three original contributions with respect to the existing literature. First, our study is based on data from a much longer period of time which gives us more information. Second, the models we estimate allow for a very gradual impact of the minimum wage on the average wage, while previous studies often assumed only an immediate impact. Third, we differentiate the impact of minimum wage increases on the average wage by distinguishing between the effects of each of the three sources of increase. Our results confirm the advantages of this approach. Because of the discretionary increases of the minimum wage from the government (the so-called “coup de pouces”), the minimum wage increased more rapidly than the average wage over the period 1970-2009. Our estimates suggest that the impact on the average wage of minimum wage increases is strong. This impact is larger than in previous studies because our models take into account the existence of dynamic diffusion effects. Finally, minimum wage increases related to the legal indexation to half of the increase in the purchasing power of the SHBO have a large effect on the SHBO itself. This result suggests that a feedback effect between the minimum wage and the SHBO is possible and could trigger the dynamics between these series. As a consequence of the legal system of revaluation of the minimum wage and of the impact of these increases on the average wage, France is probably one of the industrialized countries where competitiveness is the most threatened by inflation volatility.

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Paper provided by Banque de France in its series Working papers with number 366.

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Length: 35 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bfr:banfra:366
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/

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  1. Dustmann, Christian & Ludsteck, Johannes & Schönberg, Uta, 2007. "Revisiting the German Wage Structure," IZA Discussion Papers 2685, Institute for the Study of Labor (IZA).
  2. Stephen Machin & John Van Reenen, 2007. "Changes in wage inequality," LSE Research Online Documents on Economics 4667, London School of Economics and Political Science, LSE Library.
  3. Cette, Gilbert & Etienne, Wasmer, 2009. "La revalorisation automatique du SMIC
    [Automatic indexation rules of the French minimum wage (SMIC)]
    ," MPRA Paper 18855, University Library of Munich, Germany.
  4. Frédéric Lerais & Hervé Le Bihan & Eric Heyer, 2000. "Relation de Phillips, boucle prix-salaire : une estimation par la méthode de Johansen," Économie et Prévision, Programme National Persée, vol. 146(5), pages 43-60.
  5. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  6. Patrick Sevestre & Pierre Blanchard, 1989. "L'indexation des salaires : quelle rupture en 1982 ?," Économie et Prévision, Programme National Persée, vol. 87(1), pages 67-74.
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