Many still feel pinch despite buying power boost

One of the basic beliefs of the gilets jaunes movement is that French people’s purchasing power, especially for those on the minimum wage, is falling.

23 January 2019
By Connexion journalist

Yet statistics from a number of national and international organisations show that this is not the case.

French national statistics agency Insee, for example, says the purchasing power of the average French man and woman was €160 greater in 2018 than in 2017.

So what is behind the perception that purchasing power is falling when the opposite appears to be happening?

Insee’s Julien Pouget, head of the department looking at price changes, said that while the overall picture for 2018 was positive, the situation appeared very different when looked at quarter by quarter.

“Overall, the purchasing power figures for 2018 are positive, but our studies show that many individual households do not have that impression,” Mr Pouget said.

He pointed out that France has seen small gains in average household purchasing power in the decade since the 2007/2008 economic crisis.

“The first quarter [of 2018] actually saw a fall in purchasing power, due largely to rises in the price of fuel and tobacco.

“Then, in the second quarter, there was a change to a rise in purchasing power in the figures, but that was mainly due to the issuing of dividends by companies. There are relatively few people in the lower economic groups in France who benefit from dividends.”

The third quarter was marked by sharp rises in the price of fuel, which led to 2% inflation across Europe, and that would have had an impact on how people saw prices.

Then there was a marked improvement in purchasing power figures in the last quarter as government plans to reduce charges on workers were felt in pay packets, along with cuts in taxe d’habitation.

The World Inequality Lab, which is linked to noted French economist Thomas Piketty, published the results of research last September, before the gilets jaunes protests started, and that is also relevant.

It showed the bottom 50% of earners in France are disproportionately hit by non-progressive social security charges and indirect taxes, such as those on fuel, leading to the pressure on spending power.

Its research shows that the richest 1% in France had 8% of the national wealth in 1980 and 11% in 2014, while the poorest 50% had 23% of income in 1980 and 23% in 2014.

Economist Jean Pisani-Ferry, one of President Macron’s economic advisers when he was running for president, wrote an article called Fifty Shades of Yellow on an influential blog site in which he pointed out the middle classes, who formed a significant part of the gilets jaunes movement in the early days, regard carbon taxes as unfair, especially as many now live away from their work.

Rich people do not pay carbon taxes for air travel and city dwellers benefit from subsidised transport, leaving the tax pain to be felt by the rest, especially in rural areas.

Explaining the wider perception that purchasing power has fallen, he points to many more single-person or single-parent households that are more expensive to run.

Also, expectations now include being able to pay for things like smartphones, restaurant meals and holidays, where prices have risen faster than wages.

House prices too have risen in cities, but remain stagnant in country areas, putting finances in these areas under strain.

He wrote: “The deeper issue is that many middle-class people feel the social contract is broken. They once believed that rising levels of education would bring better jobs, higher income, and upward social mobility for their children.

“But growth has become too meagre to generate significant increases in income, middle-class jobs are threatened by the digital revolution, and competition for access to the best schools increasingly seems skewed to benefit those already on top.”

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