The report published recently by the Paris School of Economics measures income and wealth inequality around the world and reveals the high share of total income accounted for by the top earners, reflecting a very worrying situation. The report notes that the top 1% of earners worldwide captured 27% of total income growth since 1980 (net of inflation), while the bottom 50% captured only 12% of income growth over the same period. The world’s reference points have definitely changed over this period. Individual country income-inequality trajectories are sometimes even more stark, but inequality in Europe has remained relatively stable since 1980.
Income distribution inequality raises a number of questions, particularly the challenge of achieving strong and sustainable growth. If growth only benefits a very small minority, then our aims cannot merely be restricted to growth at any price. The trickle-down theory whereby the poor derive benefits when the rich get richer is clearly not working, so it is vital to come up with different targets and mechanisms alongside growth to ensure a more balanced society. Continue reading →
The Macron presidency is finally going to be able to unleash its full momentum. Talks between the government and trade unions on the broad trends for forthcoming changes to French labor legislation have taken up a good deal of time over the past few weeks. The government decrees were announced on August 31 and will come before the French Council of Ministers on September 21: the President’s term can now really get started.
The government’s aim is to make the labor market more adaptable to change by altering certain aspects of labor law. Continue reading →
The French government has made its first proposals to reform the labor market. Its main idea is that competitive conditions have dramatically changed and it’s impossible to have a law that can solve all the issues.
For the government a “one size fits all” law cannot exist anymore on the labor market. The main reason is that companies face now very different environments that lead to a very specific framework for each of them. Therefore it can be efficient to commit to rules at companies’ level. These specificities are globalization which can be a very different constraint from one sector to another one, technological shocks with very different speed of adjustment depending on the type of activity, regulation can be very different between firms and sectors, companies’ size from the very large company to a very small one is also an issue and specificities associated with different sectors can have an impact on companies’ behavior.
For the English salaryman, the situation is becoming more complex. The higher inflation rate is currently reducing the gap with the nominal wage growth (graph 1). The figure for wages in January shows an increase above 2% while the inflation rate is just a little below 2%.
From the end of 2009 to the end of 2014, the purchasing power of wages has dramatically decreased. Real wage is not back to its pre-crisis level. (graph 2)
The Brexit is currently starting will be a persistent negative shock on the economy. The changes in rules for the economic relationship between UK and the European Union will have a persistent negative effect on the economic activity and therefore on the labor market. Nominal wage growth will be limited while the inflation rate will remain high. As a consequence the external negative shock will not be compensated by a strong internal demand.
The situation will be hard to manage in the UK.