Spending

Why spending power is key to winning the French presidential election

While France’s general shift to the right has quickly propelled immigration and security issues to the top of the electoral debate, recent protests show that people are actually more bothered by their diminished purchasing power. Now the candidates for the April vote are collapsing with promises to keep money in people’s pockets.

“The price of everything is going up: gas, electricity, food, gasoline, it’s just not sustainable,” explains Jocelyne, retired in Paris.

She’s not poor – her pension is similar to France’s median income of around 26,000 euros a year – but she says she needs to keep tabs on what she’s spending while ‘big business rakes it in’ .

Although Jocelyne did not join last Thursday’s protest to demand higher wages, she is part of a silent majority feeling the effects.

France’s statistics institute, Insee, has predicted purchasing power will fall by 0.5% in the first six months of this year – a prognosis that sent shivers down the spine of the government just nine weeks before the election presidential.

“Rising prices are top billing among the French population,” Bruno Jeambart, co-president of the Opinion Way polling institute, told RFI. Their latest data shows that 59% of people put purchasing power ahead of social protection, security, immigration and the environment.

An earlier survey by Odoxa showed that 80% of French people believed their purchasing power had fallen over the past year, while 94% believed the closures had accelerated the rise in prices.

Better ?

The price of petrol at the pump is at an all-time high with prices soaring 2.8% in 2021. But the government has struggled to reassure the French that they are doing better since the coming to power of Emmanuel Macron in 2017.

“The richest and the poorest, everyone has seen their purchasing power increase,” the president said in a television interview last December.

The government has indeed taken, or announced, a number of measures. It abolished the council tax (housing tax) on main residences, introduced a minimum retirement pension of 1,000 euros per month for farmers, increased wages for the lowest-paid public sector workers and gave a bonus to frontline health workers.

With bitter memories of how fuel hikes at the end of 2018 sparked lengthy anti-government protests by so-called ‘yellow vests’, the government has been careful to shield France from massive global gas price increases and oil.

After handing over a check for 100 euros to some 38 million people, Prime Minister Jean Castex announced a 10% increase in work-related transport allowances.

More importantly, the government kept its promise to cap electricity price increases at 4% in 2022, even if that meant battling with the European Commission and energy giant EDF, whose state is a major player.

Its CEO said the move would cost the group some 8 million euros.

Overall, the Treasury data, supported by INSEE, confirm the government version of the facts. Between 2017 and 2022, gross income per household increased by 8%, almost double that of the 2013-2017 period.

However, a study by the independent Institute of Public Policy (IPP) in November 2021 was more nuanced, finding that the poorest 5% of the French population had seen their standard of living fall over the past five years.

Different perceptions

The seemingly conflicting data is partly due to differences in how purchasing power – a complex notion – is calculated.

But why do the French feel worse off when the data suggests that is not the case?

For Thierry Pech, head of the Terra Nova think tank, there is a “perception distortion” between the way individuals see their financial situation and the way economists and government officials make their own calculations.

“That doesn’t mean they’re wrong, but they’re not talking about the same things,” he said. The world Daily.

Experts analyze the evolution of a household’s disposable income over time, that is to say the budget it has after tax and once it has received benefits.

But for most people, their budget is what they have left after deducting fixed monthly expenses like rent, heating, insurance, internet connection, insurance, school canteens, and essential expenses like food and transportation.

According to INSEE, this type of expenditure has increased over the past 50 years, and by 29% in 2019. In addition, fixed expenditure represents almost a third of the income of the poorest 20%, but only a fifth. of the richest 20%.

Pech says people see their buying power as “how little you have left after you’ve paid for all those expenses.”

He also points out that price hikes on things you see/use daily like fuel or cigarettes – even if it’s only a few cents – tend to make a bigger impression than, say, the exemption of the housing tax, even if the latter is a big saving over the year.

Wages

The perception that purchasing power is diminishing is also compounded by the large profits recorded by companies – such as the French pharmaceutical giant Sanofi – during the pandemic.

“Out of 7 billion euros in profits, around 5 billion euros will go to shareholders in the form of dividends,” Pascal Collemine, CGT union representative at Sanofi, told RFI.

“Dividends are increasing every year but wages are stagnating or even falling in some sectors.”

Boris Plazzi, also from the CGT union, underlined “the anger that is rising in the country, a combativeness that we have not seen for a long time on the question of wages”.

Raising wages is clearly a way to improve purchasing power, and Labor Minister Elisabeth Borne has pressured French companies to make an effort, especially in view of the 7% growth forecast for 2022.

Geoffroy Roux de Bézieux, president of the Medef employers’ union, believes that the time has come to increase wages.

“When margins are maintained or increased, there is leeway in negotiations,” he told RFI.

“The balance of power is starting to shift in many sectors because there are recruitment problems [in hospitality, restaurants and bars]so there will be significant wage increases negotiated early this year.

De Bezieux acknowledged that this “won’t solve everything” due to the complicated increases in the price of real estate and energy.

promises

The complexity of boosting purchasing power has not deterred some of the big presidential candidates from making generous pledges.

Christiane Taubira, a left-wing candidate freshly nominated via the popular primary, said that it was a question of “responding to the problem of the purchasing power of millions of French people”.

Valérie Pécresse, the right-wing candidate for the Les Républicains (LR) party, has promised an additional 10% to some 12 million employees who earn less than 3,000 euros net per month.

The communist Fabien Roussel announces that he will increase the minimum wage (1,603 euros gross) by 20% and set pensions at 1,500 euros.

Socialist Party candidate Anne Hidalgo says she also intends to raise the minimum wage but by 15%.

The hard right Marine Le Pen proposes to reduce VAT on energy from 20% to 5% and to abolish the TV license fee, which costs 138 euros in mainland France and 88 euros in the overseas departments.

The ruling party LREM, meanwhile, is still waiting for its leader to declare himself a candidate.