German women work less than French women

By Hélène Périvier and Gregory Verdugo

In terms of the employment rate, French women work less than German women: in 2017 the employment rate of women aged 15 to 64 was 67.2% in France against 75.2% in Germany. But this commonly used indicator does not take into account that to arrange their time German women are more likely to be in part-time work than French women. Continue reading “German women work less than French women”

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The minimum wage: from labour costs to living standards. Comparing France, Germany and the UK

By Odile Chagny, IRES, Sabine Le BayonCatherine Mathieu, Henri Sterdyniak, OFCE

Most developed countries now have a minimum wage, including 22 of the 28 EU countries. France has long stood out for its relatively high minimum wage, the SMIC. But in 1999, the United Kingdom introduced a minimum wage, and the British government’s goal is to raise this level to 60% of the median wage by 2020, which would bring it to the level of France’s SMIC and among the highest-ranking countries in the OECD. More recently, in 2015, Germany also introduced a minimum wage. Continue reading “The minimum wage: from labour costs to living standards. Comparing France, Germany and the UK”

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What is the initial assessment of Germany’s minimum wage?

By Odile Chagny (IRES) and Sabine Le Bayon

A year and a half after introducing a statutory minimum wage, the German Commission in charge of adjusting it every two years decided on 28 June to raise it by 4%. On 1 January 2017, the minimum will thus rise from 8.50 to 8.84 euros per hour. This note offers an initial assessment of the implementation of the minimum wage in Germany. We point out that the minimum wage has had some of the positive effects that were expected, helping to reduce wage disparities between the old Länder (former West Germany) and the new Länder (former East Germany), and between more skilled and less skilled workers. Continue reading “What is the initial assessment of Germany’s minimum wage?”

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Wage moderation in Germany – at the origin of France’s economic difficulties

By Xavier Ragot, President of the OFCE, CNRS-PSE, together with Mathilde Le Moigne, ENS

If the future of the euro zone does indeed depend on political cooperation between France and Germany, then economic divergences between the two countries should be a cause for concern. These divergences need to be analysed, with particular attention to three specific areas: the unemployment rate, the trade balance and the public debt. Germany’s unemployment rate is falling steadily; in June it was under the 5% mark, which represents almost full employment, whereas the French rate is over 10%. Germany’s low unemployment rate does not however reflect strong consumption by German households, but rather the country’s export capacity. While France continues to run a negative trade balance (importing more than it exports), Germany is now the world’s leading exporter, ahead of China, with a trade surplus that will run close to 8% in 2015. As for the public deficit, it will be around 3.8% in France in 2015, while Germany is now generating a surplus. This has impressive consequences for the way the public debt is changing in the two countries. In 2010 they were similar, at around 80% of GDP, but in 2014 Germany’s public debt fell below 75%, and is continuing to decline, while France’s debt has continued to grow, and has now hit 97%. This kind of gap is unprecedented in recent times, and is fraught with mounting tension over the conduct of monetary policy. Continue reading “Wage moderation in Germany – at the origin of France’s economic difficulties”

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Investment behaviour during the crisis: a comparative analysis of the main advanced economies

By Bruno DucoudréMathieu Plane and Sébastien Villemot

This text draws on the special study, Équations d’investissement : une comparaison internationale dans la crise [Investment equations : an international comparison during the crisis], which accompanies the 2015-2016 Forecast for the euro zone and the rest of the world.

The collapse in growth following the subprime crisis in late 2008 resulted in a decline in corporate investment, the largest since World War II in the advanced economies. The stimulus packages and accommodative monetary policies implemented in 2009-2010 nevertheless managed to halt the collapse in demand, and corporate investment rebounded significantly in every country up to the end of 2011. But since 2011 investment has followed varied trajectories in the different countries, as can be seen in the differences between, on the one hand, the United States and the United Kingdom, and on the other the euro zone countries, Italy and Spain in particular. At end 2014, business investment was still 27% below its pre-crisis peak in Italy, 23% down in Spain, 7% in France and 3% in Germany. In the US and the UK, business investment was 7% and 5% higher than the pre-crisis peaks (Figure). Continue reading “Investment behaviour during the crisis: a comparative analysis of the main advanced economies”

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The erosion of France’s productive base: causes and remedies

Xavier Ragot, President of the OFCE and the CNRS

The deindustrialization of France, and more generally the difficulties facing sectors exposed to international competition, reflects trends that have been at work in France and in Europe for more than a decade. Indeed, while the strictly financial moment when the crisis struck in 2007 was the result of the bursting of the American real estate bubble, the scale of its impact on Europe’s economy cannot be understood without looking at vulnerabilities that have previously been neglected.

In “Érosion du tissu productif en France: Causes et remèdes”, OFCE working document no. 2015-04, Michel Aglietta and I offer a summary of both the microeconomic and macroeconomic factors behind this productive drift. Such a synthesis is essential. Before proposing any policy changes for France, it is necessary to make a coherent diagnosis of major trends in international trade as well as of the real situation of France’s productive fabric. Continue reading “The erosion of France’s productive base: causes and remedies”

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Should Germany’s surpluses be punished?

By Henri Sterdyniak

On the procedure for macroeconomic imbalances

Since 2012, every year the European Commission analyses the macroeconomic imbalances in Europe: in November, an alert mechanism sets out any imbalances, country by country. Countries with imbalances are then subjected to an in-depth review, leading to recommendations by the European Council based on Commission proposals. With respect to the euro zone countries, if the imbalances are considered excessive, the Member state is subject to a macroeconomic imbalance procedure (MIP) and must submit a plan for corrective action, which must be approved by the Council. Continue reading “Should Germany’s surpluses be punished?”

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Does growth in the euro zone really depend on a hypothetical German fiscal stimulus?

By Christophe Blot and Jérôme Creel

The debate on economic policy in Europe was re-ignited this summer by Mario Draghi during the now traditional symposium at Jackson Hole, which brings together the world’s main central bankers. Despite this, it seems that both the one side (Wolfgang Schaüble, Germany’s finance minister) and the other (Christine Lagarde, head of the IMF) are holding to their positions: fiscal discipline plus structural reforms, or demand stimulus plus structural reforms. Although the difference can seem tenuous, the way is now open for what Ms. Lagarde called “fiscal manoeuvring room to support a European recovery”. She is targeting Germany in particular, but is she really right? Continue reading “Does growth in the euro zone really depend on a hypothetical German fiscal stimulus?”

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A minimum wage in Germany: a small step for Europe, a big one for Germany

By Odile Chagny (Ires) and Sabine Le Bayon

After several months of parliamentary debate, a minimum wage will be phased in between 2015 and 2017 in Germany. The debate led to only slight modifications in the bill introduced last April, which came out of the coalition agreement between the Social Democrats and the Christian Democrats. The minimum wage will rise in 2017 to 8.50 euros gross per hour, or about 53% of the median hourly wage. In a country that constitutionally guarantees the social partners autonomy in the determination of working conditions, this represents a major rupture. Overall, the importance of the introduction of the minimum wage lies not so much in the stimulus it will be expected to have on growth in Germany and the euro zone as in the turning point it represents in how the value of labour is viewed in a country that has historically tolerated the notion that this can differ depending on the status of the person (or persons) carrying it out [1]. Continue reading “A minimum wage in Germany: a small step for Europe, a big one for Germany”

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France-Germany: is there a demographic dividend?

By Vincent Touzé

Thanks to a high birth rate, France is aging less quickly than Germany. According to Eurostat, the French population is expected to exceed the German population by 2045. France could well become a European champion. But to what extent should we be talking about a demographic dividend? Continue reading “France-Germany: is there a demographic dividend?”

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