Good news for workers, leaving inflation behind, revealing top business priorities

As we enter 2024, good news will come to French workers – who have endured difficult years following the Covid-19 crisis – wages will increase more than inflation.

Salaries in France will continue to rise in 2024. (Source: OMFIF)

Six months before elections in Europe, the issue of wages has been placed at the top of the agenda.

Over the past few months, French President Emmanuel Macron has consistently encouraged employers to support their employees' incomes, while also speaking out against professional sectors that have not updated their minimum wage scales. Simultaneously, unions have mobilized workers whose wages have been continuously cut due to hyperinflation and organized a unified march on this issue in mid-October 2023.

In a speech on January 16, President Emmanuel Macron promised to “bring more dynamism to the issue of jobs.”

Wages will increase more than inflation.

All current research indicates that wages will definitely continue to rise in 2024.

A study by the French central bank, Banque de France, in late December 2023 indicated that the average wage increase is expected to be 3.5% in 2024.

Another report published by WTW in mid-January 2024 indicated a 4% increase. Certainly, these figures relate to the situation in 2023, when business leaders may have placed high demands on workers, making it more difficult to earn a living.

For comparison, the growth rate of the monthly basic wage (SMB) index did not exceed 1.5% in 2020 and 1.7% in 2021.

More importantly, this development will take place against a backdrop of stable prices.

Bruno Ducoudré, an expert from the Macroeconomic Forecasting and Research Department at the Banque de France, analyzed: "The inflation rate will be at 2.5% in 2024 compared to 5.7% in 2023." This is enough to allow workers to ultimately see the benefit they receive in the form of an increased standard of living.

In 2024, the renowned French economic policy think tank OFCE in Paris estimates that real household income will be 2.5% higher than in 2019.

Conversely, some business leaders will cut profit margins to provide more support for their employees. More accurately, people will work to the best of their ability.

Pierre Burban, General Secretary of the Alliance of Local Businesses, assured: “Companies are mobilized to maintain the purchasing power of their employees.”

Éric Chevée, Vice President of the Confederation of Small and Medium Enterprises (CPME) in charge of social issues, added that employers always have the same mindset when it comes to salary increases, that companies can raise wages for their employees.

Audrey Louail, Chair of the Croissance Plus business network, said: “Increasing our workforce will remain a top priority for 2024.”

However, in 2024, wages will increase more than inflation. This is good news for workers, who have endured difficult times following the Covid-19 crisis.

According to the INSEE research agency, average net wages in fixed euros fell by 1% in 2022, the sharpest decline observed in the past 25 years. Some workers earn lower wages than others.

The minimum wage increased by an average of 13.5% after seven increases between January 1, 2021, and May 1, 2023. This helped protect workers' purchasing power but reduced the percentage of workers earning the minimum wage from 12% to 17.3%. People living in rural areas were more affected by rising fuel prices or suffered more from rising food prices.

Skilled workers will be the winners.

The Employers' Federation (MEDEF) believes that companies that implemented wage increases in 2023, with average increases, successfully offset inflation. MEDEF predicts that wage increases will continue in 2024, despite a more tense economic climate.

CFDT union general secretary Marylise Léon pointed out that, in addition to the pension issue, the wage issue was the main reason for the 2023 strike.

CPME shared: “When there is no inflation, employee performance and productivity will increase. But when there is price increases leading to inflation, we must necessarily take this into account when adjusting wage increases. Business leaders are very aware of the realities and difficulties of daily life.”

In December 2023, the union stated that 20% of business leaders earned less than €1,400 per month. According to CPME, wage increases should aim to keep pace with or surpass the rate of inflation.

The French central bank believes that hard-working individuals will certainly receive valuable rewards this year, even if 2024 presents unfavorable conditions, particularly due to the imposition of insurance premium taxes.

For WTW, highly skilled workers will be the winners. Their survey revealed that, “62% of companies have begun reviewing their compensation policies for the struggling segment of highly skilled workers.” This is due to a less dynamic labor market, where recruitment is clearly lacking.

According to CCI France President Alain Di Crescenzo, some negotiations will be “more difficult this year.” The real estate crisis will have a ripple effect, making wage negotiations in the construction and real estate sectors much more complicated than in 2023. This is not due to a lack of will from companies, but simply because the market is shrinking.

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