Varying minimum wage rates to be harmonised

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From 1 July 2002, the French government increased the SMIC national minimum wage by 2.4% . This was the statutory indexation-based increase, with the government having decided not to grant an extra discretionary rise. The 2.4% increase applies only to employees who are still on a 39-hour week, with those on a 35-hour week receiving only a 1.8% rise. The government is now seeking to harmonise the multiple SMIC rates which have existed since the adoption of the legislation introducing the 35-hour week, with the social partners divided over whether the harmonisation should be upwards or downwards.

From 1 July 2002, the new conservative government raised the national minimum wage (salaire minimum interprofessionnel de croissance, SMIC) by 2.4% for those workers still on a 39-hour week, bringing it up to EUR 6.83 per hour - a 0.9% increase in purchasing power. This rise represents the minimum increase provided for under the law (linked to movements in inflation and purchasing power), as the government decided not to grant a discretionary extra 'boost' ('coup de pouce') this year. The increase in the SMIC for workers in companies that have moved to a 35-hour working week is only 1.8%.

According to the new Minister of Social Affairs, Labour and Solidarity, François Fillon, the government's decision not to grant a 'boost' on this occasion was reached 'on a provisional basis, pending a decision on the convergence of the various rates of the SMIC'. An additional increase, said the Minister, would run 'counter to the goal of harmonisation' of the current separate SMIC rates and 'be harmful to job creation'.

Harmonising the SMIC

Currently, 13.9% of workers are paid at the level of the SMIC minimum wage. Yet they do not all receive the same amount. Since the legislation on the 35-hour working week was passed, several minimum wages have co-existed (FR0007177N and FR0107171F). Employees who still work a 39-hour week have their hourly rate increased on the same basis as before. However, employees whose working week has already been reduced to 35 hours are covered by another scheme implemented as part of the second 'Aubry law' on working time reduction (FR0001137F). To avoid their wages falling on a pro rata basis as statutory weekly hours were cut (ie having their weekly pay fall from 39 times the hourly SMIC rate to 35 times this amount), the previous Socialist-led government provided that employees on the SMIC and working 35 hours per week would maintain their level of pay thanks to a system known as the 'guaranteed monthly wage' (garantie mensuelle de rémunération). This means that when they switch to the 35-hour week, employees on the SMIC are paid the wage that they would have received if they worked 39 hours, with any overtime being paid as a supplement to this.

However, increases in pay for employees in this category are no longer tied to the variations in the hourly rate of SMIC, but to the 'guaranteed monthly wage' rate, which rises more slowly than the index used as the basis for calculating the increase in the hourly SMIC rate. The difference stems from the fact that the calculation of the hourly rate of the SMIC is still based on an indicator derived from variations in hourly rates of pay, while the guaranteed monthly wage takes changes in monthly pay rates into account. With growing numbers of employees switching to the 35-hour week, this generally translates into a widening gap between the rises in hourly and monthly pay, as the former is increasing more rapidly than the latter. Besides, the law does not provide for the 'guaranteed monthly wage' to be afforded the occasional boost granted to the SMIC calculated on an hourly basis. Hence the growing and variable gap between the hourly and monthly rates of SMIC, depending on when employees move to the 35-hour week.

In this 'multiple SMIC' system, there are thus various minimum monthly pay rates. The earlier employees switched to the 35-hour week, the lower their 'guaranteed minimum wage'. This is because this wage depends on the monthly rate of the SMIC in force on the date of the relevant agreement to move to the 35-hour week, and thereafter rises at a lower rate than the hourly SMIC rate. In practice, today the monthly minimum wage can thus vary between EUR 1,100.67 (for workers who switched to the 35-hour week before 1 July 1999) and EUR 1,147.52 (for those changing to the 35-hour week between 1 July 2001 and 30 June 2002). For employees who are to switch over to the 35-hour week in the coming year, and are still covered by the hourly SMIC rate, the monthly wage for a 39-hour week stands at EUR 1,154.27.

The previous administration had planned steadily to eliminate these discrepancies and end up with a single SMIC rate by 2005, but the ways in which this transition was to take place were never fixed. On 4 June 2002, the new Prime Minister, Jean-Pierre Raffarin, requested the Economic and Social Council (Conseil économique et social) (FR9910115N) to 'diagnose the economic and social consequences of the multiple SMIC levels, and produce an inventory of potential solutions'. On 26 June, the Minister of Social Affairs, Labour and Solidarity announced that he was to submit a SMIC convergence plan to the social partners in September 2002.

Social partners' reactions

In terms of the government's general approach to the SMIC decision, the trade unions unanimously criticised its methods. Every year, the government's decision on the SMIC increase is taken after the annual meeting of the National Collective Bargaining Commission (Commission nationale de la négociation collective), which brings together all the social partners, and gives its opinions on the government's proposals. However, before the annual meeting on 24 June 2002, the Prime Minister implied on 21 June that he was unwilling to grant a 'boost' to the SMIC, preferring to prioritise 'the harmonisation of the various levels of SMIC'. This appeared to contradict the new government's declared willingness to prioritise dialogue and consultation with the social partners (FR0206102N).

The unions were also critical of the content of the government's decision, as they believe that the harmonisation of the various levels of the SMIC, one of their longstanding demands, should be carried out 'upwards', by aligning the various guaranteed monthly rates to the highest. To achieve this objective, it would be necessary to grant a substantial increase to the guaranteed hourly rate, which the government refused to do.

The employers, however, were satisfied with the government's decision, which matched their own wishes. After the meeting of the National Collective Bargaining Commission in June and before the government reached its decision, a representative of the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), Denis Gautier-Savagnac, had stated that 'if the government chooses to raise the SMIC by the statutory amount alone, it would be a solution that meets the expectations of businesses and their objectives in terms of employment levels.' A representative of the General Confederation of Small and Medium-sized Enterprises (Confédération générale des petites et moyennes entreprises, CGPME) also approved an increase in the SMIC 'limited strictly to the statutory obligation'. In the opinion of CGPME, it was also essential 'to create new criteria for the development of the SMIC, which, by steadily bringing stability to it, will help break out of the current vicious circle'.

Commentary

By allowing several minimum wage rates to co-exist when the law on the 35-hour working week was introduced, the previous government had left the issue of their necessary harmonisation, demanded both by unions and employers, unresolved. The talks on the matter to take place in September 2002, as announced by the new government, look likely to bring conflict, with the positions of unions and employers so far apart. The government decision to stick to the narrow statutory obligation in increasing the hourly rate of the SMIC does not bode well for employees. In addition to the problem of the rate of the SMIC, the way the minimum wage is to be indexed will also inevitably be on the agenda.

The production and adoption by the Economic and Social Council of a report and recommendations on the SMIC will enable a clear understanding, both of the various theories currently in circulation, and of the stances adopted on this issue by the various trade unions and employers' associations. (Pierre Concialdi, IRES)

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