The political debate often returns to the comparison of competitiveness between Germany, the driving force of the European Union, and France, with reference made to labor costs.
The study below shows that participants in this debate demonstrate ignorance and often speak without understanding what they are saying. This is quite regrettable, especially when one holds a public position.
Based on a novel comparison of wage dispersion between the two countries, France Stratégie shows that wage differentiation has provided a definite advantage to the German industry, allowing it to combine wage attractiveness with both cost and non-cost competitiveness.
The price in terms of wage inequalities has been significant for Germany, whereas France emerges as a country that has organized more uniform wage evolution modalities across sectors.
Assessments of cost competitiveness often rely solely on comparing wage costs in the manufacturing industry. Recent studies on Germany have highlighted that the increasing wage disparities between sectors and qualification levels have been a key factor in the competitiveness of the export industry. These characteristics are not at all found in France.
The following results emerge from this analysis note:
While the average hourly cost of labor is approximately 9.2% lower in Germany than in France, the average gross hourly wages are, on the other hand, about 5.6% higher in Germany across almost all major sectors, except for business services;
Low wages are significantly lower in Germany than in France, and it is in Germany that wage inequalities, especially at the lower end of the hourly wage scale, are the highest in the European Union, ahead of the Central and Eastern European countries.
Wage segmentation, according to working hours, gender, age, sectors, and job status (subsidiary or not, hosting posted workers or not) is much more pronounced in Germany than in France.
The most remunerative sectors are not the same in the two countries, reflecting differences in productive systems and disparities in the sectors’ wage attractiveness.
In Germany, it is the industry and network activities that are at the top of the wage hierarchy, whereas in France, it is the financial services, business services, and network activities.
Wage differentiation has allowed the German industry to manage cost competitiveness constraints while maintaining relatively attractive wages by benefiting from wage differentials with low value-added services.
The strategy worked as long as solidarity mechanisms made commodity income inequalities “acceptable” because they were partially compensated by the redistribution system. The cost in terms of wage inequalities has been significant and contributed to the introduction, at the beginning of 2015, of a legal interprofessional minimum wage.
Conversely, France stands out as a country that has, until now at least, organized more uniform wage evolution modalities across sectors.
As a result, the industry and more generally the tradable goods sector have benefited less from the low cost of their inputs, which has impacted their competitiveness.
