Informations Rapides · 16 June 2023 · n° 150

In Q1 2023, labour cost index – wages and salaries increased by 1.2%, total labour cost index by 1.6% Labor cost index in industry, construction and services - first quarter 2023

In the first quarter of 2023, the payroll increased significantly more than the number of hours paid by employers, so that hourly wages increased. This increase was the result of the inflation being taken into account in wage negotiations as well as the automatic 1.81% increase in the minimum wage on 1^st January. However, at the start of 2023, wage dynamics were adversely affected by the significant payments of the Value Sharing Premium (PPV) in the fourth quarter of 2022: €1.1 billion were paid to employees in the non-farm business sector excluding household services in the first quarter of 2023, compared with €3.3 billion in the previous quarter. This scheme, which replaced the special bonus for purchasing power, allows firms to pay, between July 2022 and December 2023, up to 3,000 euros of bonuses per calendar year and per employee (and even 6,000 euros in the case of a profit-sharing agreement), free of social security contributions and income tax.

In addition, the “1 young person, 1 solution” plan, launched at the end of July 2020, contributed to labour cost variations until the first quarter of 2023. As part of this plan, from January 2023, employers are eligible, under certain conditions, for aid of up to €6,000 to hire a young worker with a sandwich course contract.

In the first quarter of 2023, the labour cost index (LCI) - wages and salaries in the non-farm business sector slowed down: +1.2% over the quarter, after +1.6% in the previous quarter (seasonally and trading days adjusted data). This slowdown was the result of lower payments of PPV in the first quarter of 2023, which contributed -1.0 percentage point to the quarterly change in hourly wages. Particularly in construction, where PPV payments were relatively high at the end of 2022, hourly wages fell in the first quarter of 2023 (-0.6% quarter-on-quarter, after +2.2%).

Year-on-year, hourly wages rose sharply: the LCI – wages and salaries rose by 4.1% in the first quarter of 2023 (after +5.2% the previous quarter). These annual increase in wages took place in a context of high inflation, which led to several automatic revaluations of the minimum wage in 2022 and early 2023. Year-on-year, wages were particularly dynamic in construction (+4.9%), while they grew less in industry (+3.9%) and services (+4.0%). In services, wage growth was particularly strong in sectors where low-paid workers are over-represented (transportation and storage, administrative and support services, accommodation and food service activities), mainly because they are more affected by increases in the minimum wage.

Compared to the previous estimation of 17March 2023, the Q4 2022 quarter-on-quarter variation in labour cost index – wages and salaries has been revised downwards by 0.4 percentage points, to +1.6%, due to the revision of the seasonal adjustment method; the year-on-year variation is unchanged.

In the first quarter of 2023, the total labour cost index (LCI) in the non-farm business sector accelerated: +1.6% over a quarter, after +1.2% in the fourth quarter of 2022. As in the previous quarter, the difference in dynamism with the LCI – wages and salaries was mainly explainedby the PPV, which is not subject to social security contributions: in the fourth quarter of 2022, hourly wages had risen faster than hourly costs as a result of massive PPV payments; in the first quarter of 2023, the sharp decline in PPV payments mechanically contributed to the higher growth in hourly labour costs.

Year-on-year, the total labour cost rose by 3.8% in the first quarter of 2023, after +4.8% in the previous quarter. In accommodation and food services, the rise in hourly labour costs (+6.1%) remained more marked than that in hourly wages (+5.1%), as in previous quarters. This is because, during the health crisis, the exemptions from employers’ social contributions and the aid for the payment of contributions contained the increase in the labour cost in this sector; as these measures came to an end in 2023, the total LCI consequently rose more sharply than the LCI – wages and salaries.

Compared to the previous estimation of 17March 2022, the Q4 2022 quarter-on-quarter variationhas been revised downwards by 0.2 percentage points; the year-on-year change has been revised upwards by 0.1 percentage points.