Informations Rapides · 16 December 2022 · n° 337_en

In Q3 2022, labour cost index – wages and salaries increased by 1.7%, total labour cost index by 1.5% Labor cost index in industry, construction and services - third quarter 2022

In the third quarter of 2022, the number of hours paid by employers fell slightly while the payroll increased sharply in a context of high inflation, which encouraged wage negotiations and led to a new automatic revaluation of the minimum wage of +2.01% on 1^st August 2022 (after a 2.65% increase on 1^st May 2022). The payroll was also boosted by the introduction, in July, of the Value Sharing Premium (PPV), which replaced the exceptional purchasing power bonus (Pepa) that ended on 31^st March 2022. It takes up its principles with a tripling of the payment caps: firms may pay, between July 2022 and December 2023 and to employees whose wage is lower than 3 times the minimal wage, up to 3,000 euros (and even 6,000 euros for those who have concluded a profit-sharing agreement), free of income tax and social security contributions.

In addition, various labour cost reduction measures are taken into account in the labour cost index and contribute to its variations until the third quarter of 2022.

On the one hand, the “1 young person, 1 solution” plan, launched at the end of July 2020 and extended until December 2022, provides under certain conditions for a premium, up to €4,000, to employers hiring a young worker under 26 years of age. It also provides for an exceptional aid for hiring a young worker with a sandwich course contract, up to €8,000 if the worker is older than 18 years old and up to €5,000 otherwise.

On the other hand, the plan to support the tourism sector decided on May 2020 provides for exemptions from employers’ social security contributions and assistance with the payment of contributions for the firms with fewer than 250 employees in some sectors, especially concentrated in trade, accommodation and food services and administrative and support service activities (list extended in October 2020). These measures have been gradually reduced as the health crisis came to an end; however, some employers still have the opportunity of charging to 2022 the remainder of the aid for the payment of contributions to which they were entitled in 2021 and from which they have not yet benefited fully.

In the third quarter of 2022, the labour cost index (LCI) - wages and salaries in the non-farm business sector increased by 1.7% over the quarter, after a decline (-0.5%) in the previous quarter (seasonally and trading days adjusted data). The decline in hourly wages in the second quarter of 2022 was explained in particular by the end of the exceptional purchasing power bonus scheme at the end of March, while the introduction of the Value Sharing Premium scheme in July contributed to the rebound of the labour cost index (LCI) - wages and salaries in the third quarter.

Year-on-year, the LCI – wages and salaries increased sharply: +3.8% compared to the third quarter of 2021 (after +1.8% in the previous quarter), in a context of high inflation (+5.6% in September over one year). Wages rose in particular in construction (+4.2% year-on-year) but less markedly in industry (+3.2%) where wages are, on average, higher. In services, hourly wage dynamics cover heterogeneous situations: over one year, the LCI – wages and salaries increased by 1.5% in information and communication, for example, but by 5.5% in accommodation and food services. Low-paid workers are overrepresented in this sector, which has been therefore particularly affected by the automatic revaluation of the minimum wage since October 2021.

Compared to the previous estimation of 15^th September 2022, the Q2 2022 quarter-on-quarter variation in labour cost index – wages and salaries has been revised downwards by 0.3 percentage points; the year-on-year variation has been revised downwards by 0.2 percentage points. These downward revisions were mainly due to the upward revisions of paid hours in the second quarter of 2022.

In the third quarter of 2022, the total labour cost index (LCI) in the non-farm business sector increased by 1.5% after a decrease of 0.4% in the second quarter of 2022. These evolutions followed a similar pattern to that of the LCI - wages and salaries.

Over a year, the total labour cost increased by 3.6% in the third quarter of 2022, after +1.7% in the previous quarter. In accommodation and food services, the increase in hourly labour costs (+9.0%) was more pronounced than that of hourly wages (+5.5%), which reflected a “catch-up” effect: during the health crisis in 2020 and 2021, the exemptions from employers’ social contributions and the aid for the payment of contributions contained the increase in the labour cost. As the use of these schemes tended to be significantly reduced, the total LCI increased much more strongly than the LCI – wages and salaries as a result.

Compared to the previous estimation of 15^th September 2022, the Q2 2022 quarter-on-quarter variation in labour cost index in the non-farm business sector has been revised downwards by 0.4 percentage points; the year-on-year change has been revised downwards by 0.5 percentage points. These downward revisions were mainly due to the downward revisions of the LCI - wages and salaries in the second quarter of 2022 and, to a lesser extent, to the upward revisions of the exemptions taken into account in the labour cost index.