IZA DP No. 861: Inflation, Minimum Wage and Other Wages: An Econometric Study on French Macroeconomic Data
published in: Applied Economics, 2004, 36 (4), 277-290
This paper examines the set of interdependences between the formation of wages, prices and the minimum wage (SMIC) through a vectorial error correction model estimated on French quarterly macroeconomic data covering the 1970-1/1999-4 period. Two periods are distinguished: the period of inflation rise from 1970 to 1981, which coincides with an important squeeze of the wage range, measured by the ratio of the minimum wage to the hourly wage rate; the period of disinflation since 1981, that has been concomitant with a stability of wage inequalities. Disinflation has hardly benefited the evolution of the SMIC which has always profited by price rises, in real and relative terms, which have become less strong. This evolution doesn’t benefit any more of wage rises, when the interdependences between variables are taken into account. The SMIC seems however to have gained in efficiency as an instrument of wage disparity reduction. Its rises are finally more persistent in real terms and relatively to the other salaries and have always as little inflationary impact on wages as on prices.