Wage Resilience in France since the Great Recession

D. Audenaert, J. Bardaji, R. Lardeux, M. Orand and Michaël Sicsic
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D. Audenaert: Insee
J. Bardaji: Insee
R. Lardeux: Insee
M. Orand: Insee

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: From 2009 onwards, the slowdown in French real wages was less acute than that in labour productivity, which pulled French firms margin rate down. This article deals with this recent disconnection and surveys two potential explanatory hypotheses: labour force composition effects and downward nominal wage rigidities. The first assumption is related to the impact on the average wage of increasing job losses, especially when they are concentrated on lower-paid workers. Labour force structure evolution does contribute to wage resilience, but with little difference between 2009 and the period before, in which we observe a long run increasing trend of the working population toward a higher qualification. The downward nominal wage rigidities assumption is bounded by the empirical evidence of a significant amount of wage drops, while wage freezes are rare. Furthermore, in 2009, wages decreased faster as the firms activity dropped than they increased as the firms situation improved. However, the estimation, done at the wage earner level, shows the low response of wages to a (positive or negative) activity shock, especially for lower wage earners and large firms. The elasticity of wages with respect to a negative shock, though increasing in 2009, remains low in absolute terms. This wage inertia would facilitate the recovery of the firms margin rate in times of strong economic upturn.

Keywords: Wages; Rigidity; Labour force structure; Cointegration (search for similar items in EconPapers)
JEL-codes: C22 J21 J30 J31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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