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The BPCE - Viavoice barometer survey of projects planned by the French - May 2012

French people believe that the minimum wage is key to raising purchasing power

Purchasing power remains a priority for French people, and along with employment, it is set to be one of the major issues for the new government in the months ahead. In this respect, the current economic environment is overall encouraging, as fuel prices are relatively low – putting off the campaign promise of freezing prices to a later date – and consumption is slowly picking up.

However, French people have big expectations, even on issues on which the government admits it has little room for manoeuvre. An increase in the minimum wage tops the list of expectations in terms of boosting purchasing power, especially among low-paid workers, who have been the hardest hit by the crisis. The government, which is currently holding talks with unions and employers, has promised "a boost" for the minimum wage, but no significant increase.

Purchasing power: lower fuel prices are reassuring consumers

The main consumer budget items that worry French people are currently declining:

  • French people are less worried about fuel prices, which recently fell to their lowest level since January: 40% of respondents cite fuel prices as their main concern, with this figure showing a 10-point decline in one month;
  • The same trend applies to food prices, though to a lesser extent (45%, -4 points).

These trends account for the decline in concerns about overall purchasing power, though these concerns remain strong, as 36% of respondents expect their purchasing power to fall (down 3 points). More and more French people now expect their purchasing power to stagnate (47%, +8 points).

An increase in the minimum wage is widely expected, in particular among lower income brackets

The priorities identified by French people in terms of purchasing power and savings are emblematic of the importance of the issue of wages, in particular for low-paid workers. Wages have only risen very slowly in recent years, held back by the economic crisis, rising unemployment and efforts to improve competitiveness by employers. This tough environment largely explains why the item that tops the list of concerns is an increase in the minimum wage, which is considered the main priority for 39% of all people surveyed and for a majority of lower income brackets, employees (50%), manual workers (54%) and young people (49% of 18-24 year olds).

The second priority is the temporary freezing of fuel prices, which is the main concern for 36% of respondents. The fact that this measure ranks second clearly indicates that oil prices remain a major issue for purchasing power, despite the recent fall in prices.

However, the executive branch has confirmed that these two biggest concerns are unlikely to give rise to significant measures in the coming months:

  • The new labour minister, Michel Sapin, has ruled out a big increase in the minimum wage. The new majority and certain unions (in particular the CFDT) agree that there is little room for manoeuvre on this topic and have pointed out that a large rise in the minimum wage would have a high price for businesses;
  • The freezing of fuel prices has been deferred as global oil prices have fallen, reducing prices at the pump.

So the new government is facing a conflict between the expectations of the majority of French people and its own announced priorities for the months ahead

While Nicolas Sarkozy partly disappointed public opinion on purchasing power, the new government is now expected to act on these sensitive issues, in what remains a gloomy economic environment. For François Hollande and his new government, the solution will involve finding a balance between responding to immediate concerns and boosting the longer-term outlook for purchasing power by enhancing productivity, competitiveness and growth.

It is largely a question of managing timing in terms of policies and communication.