France witnessed an increase in the labor cost index (LCI) for wages and salaries in the first quarter of 2023. According to the latest data published by INSEE (French National Institute of Statistics and Economic Studies), the LCI for wages and salaries rose by 1.2% during this period. This increase follows a previous quarter growth of 1.6% (seasonally and trading days adjusted data).
The slowdown in the LCI for wages and salaries can be attributed to lower payments of the Value Sharing Premium (PPV) in the first quarter of 2023, which contributed to a decrease of 1.0 percentage point in the quarterly change of hourly wages. Particularly in the construction sector, where PPV payments were relatively high at the end of 2022, hourly wages experienced a decline of 0.6% in the first quarter of 2023, following a significant increase of 2.2% previously.
However, on a year-on-year basis, hourly wages witnessed a significant rise, with the LCI for wages and salaries increasing by 4.1% in the first quarter of 2023. This substantial annual growth in wages can be attributed to high inflation levels, which resulted in several automatic revaluations of the minimum wage in 2022 and early 2023. Notably, wage growth was particularly prominent in the construction sector (+4.9%), while experiencing comparatively slower growth in industry (+3.9%) and services (+4.0%). Sectors with a higher concentration of low-paid workers, such as transportation and storage, administrative and support services, and accommodation and food service activities, witnessed stronger wage growth due to their vulnerability to increases in the minimum wage.
Total Labor Cost Index Witnesses a 1.6% Increase in Q1 2023
In addition to the LCI for wages and salaries, the total labor cost index (LCI) in the non-farm business sector also experienced growth in the first quarter of 2023. The total LCI increased by 1.6% over the quarter, following a growth of 1.2% in the fourth quarter of 2022.
Similar to the LCI for wages and salaries, the difference in dynamism with the total LCI was primarily due to the PPV, which is not subject to social security contributions. In the fourth quarter of 2022, hourly wages rose faster than hourly costs due to substantial PPV payments. However, in the first quarter of 2023, the sharp decline in PPV payments contributed to higher growth in hourly labor costs.
On a year-on-year basis, the total labor cost index rose by 3.8% in the first quarter of 2023, following a growth of 4.8% in the previous quarter. Notably, the accommodation and food services sector witnessed a more pronounced rise in hourly labor costs (+6.1%) compared to hourly wages (+5.1%). This disparity can be attributed to the measures implemented during the health crisis, such as exemptions from employers’ social contributions and aid for contribution payments, which contained the increase in labor costs. As these measures ended in 2023, the total LCI rose more sharply than the LCI for wages and salaries in this sector.
The data reflects the economic dynamics of labor costs in various sectors of the French market and provides insights into wage growth and overall labor cost trends.