MAINTENANCE. Do we really need to raise wages? An economist responds

القائمة الرئيسية


MAINTENANCE. Do we really need to raise wages? An economist responds

MAINTENANCE.  Do we really need to raise wages?  An economist responds

MAINTENANCE. Do we really need to raise wages? An economist responds

Many voices argue for a general increase in wages to counter the effects of inflation. But can such a measure really solve the equation posed by rising prices? For La Dépêche du Midi, Guillaume Moukala Same, economist at Asterès, examines the question.

La Dépêche du Midi: Can an increase in wages lead to an increase in inflation?

Guillaume Moukala Same: Wages can be increased, but on one condition: that is accompanied by an increase in productivity for each company. That is to say that the rise in wages must be financed, so ideally it should be through productivity gains. Thus, we would not need to increase prices to finance these wage increases, and therefore no inflation. Because the risk is that the increase in wages is financed by an increase in the prices of the products made by the company. In this case, yes, we can imagine an even higher rise in inflation.

Could the increase in wages not make it possible to reduce unemployment?

It depends. If the increase in wages is done via a rise in prices, one can imagine inflation. The latter could lead to lower demand as people spend less. This whole scenario can lead to a short-term recession which could lead to unemployment. Once again, the ideal would be for companies to achieve productivity gains. Which means that we would have a real creation of wealth which could lead to an increase in purchasing power. An increase in wages without an increase in productivity is more risky.

What do you think of the proposal to increase the minimum wage to 1,500 euros, brought by insubordinate France?

I think the risk with this increase is that it leads to an increase in unemployment. Why ? Because the Smic concerns people who are often poorly qualified and companies are not always ready to make so much investment for these profiles. Therefore, by raising the minimum wage, companies would be neither inclined nor able to pay more for these skills.

What impact could higher wages have on growth?

Forecasts indicate that growth in 2022 will be 1.5 points weaker than had been anticipated. Once again, we have to distinguish, I think, the increases that come from productivity gains — where we are on enrichment — and those that do not induce productivity gains, in which case this could accelerate inflation and therefore have a negative impact on growth.

If we try to catch up with inflation by increasing wages, we can create an infinite loop with ever more inflation and decreasing household demand, along with growth. In short, simply raising wages to fight inflation can have negative consequences for growth.

Is it really possible to increase wages everywhere in France?

From one region or department to another, the context is not the same. Just like from one company to another. Each region, department or company should ask itself if they are able to achieve a salary increase, this may again depend on their productivity gains.

To put it simply, there are three types of wage increase: either by increasing prices, but that would lead to inflation; either by trimming the margins, but this is not very sustainable… we can imagine it in the short term but since we are already emerging from a crisis, it is difficult to imagine; or through productivity gains, but this therefore depends on the sectors and the type of companies concerned.

#MAINTENANCE #raise #wages #economist #responds