“Targeted lowering of labor costs is a winning strategy for employment” | EUROtoday

Dyears an interview given to World the 1^er December, economist Clément Carbonnier affirms that “lowering labor costs is a bad tool for creating jobs”. This debate deserves higher than a worldwide verdict.

It is true that France has gathered costly measures over the a long time whose effectiveness has most likely eroded as we transfer away from low wages. However, as we level out within the lately revealed report of the Group of Experts on the minimal wage, the obtainable empirical literature on no account permits us to conclude that the discount in labor prices would, by nature, haven’t any impact on employment. It all will depend on the extent of the minimal wage and the focusing on of help to employers.

Our conclusions are according to the report by Antoine Bozio and Etienne Wasmer from 2024, which gives an entire evaluation of employer contribution exemption insurance policies. The authors don’t dispute the existence of an employment impact of reductions in contributions close to the minimal wage. On the opposite, they level out that empirical evaluations spotlight important results for low-skilled jobs, in France and overseas.

Similarly, in its 2019 abstract, the Economic Analysis Council (CAE) concluded that “reductions in labor costs, when they are not in the form of a tax credit and when they are concentrated on low wages, do have a positive impact on employment”.

A reasonable impact of CICE

Conversely, research present that the tax credit score for competitiveness and employment (CICE), which unfold an extra discount in contributions as much as greater than thrice the minimal wage, had solely a really reasonable impact on employment, as Clément Carbonnier himself confirmed along with his co-authors, of their report revealed by the Interdisciplinary Laboratory for the Evaluation of Public Policies (Liepp) of Sciences Po, in 2017.

The essential cause is that the sensitivity of employment to its price decreases with wage: if the price of labor can certainly represent a barrier to hiring on the backside of the dimensions, significantly in small and medium-sized corporations, it turns into a much less and fewer necessary issue as salaries enhance, as a result of the productiveness of the workers involved largely compensates for the fee they characterize.

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