That is the main concern of the French. Purchasing power therefore occupies a special place on the balance sheet for every five-year period. The study, which ends next month, has achieved very honorable results in this area, according to a study by the French Observatory of Economic Conditions (OFCE) published on Thursday.
Between 2017 and 2021, purchasing power per unit of consumption – i.e. based on the number of people who form a household and also their age – increased by 0.9% per year, which is about 300 euros more per year, according to the institute.
“This is a higher increase than the last two presidential terms,” noted Mathieu Plane, an economist at the OFCE. Obviously, not everything is due to the government. The international situation also played a role. But also political decisions.
A million job creation
Firstly, employment has grown tremendously since 2017. More than a million jobs were created between the end of 2017 and the end of 2021. This has contributed to increasing the purchasing power of households. After that, the fiscal and social measures also played a role, according to the OFCE. The cuts in social contributions, the abolition of the housing tax for 80% of households, the increase in the activity bonus, the revaluation of the RSA and more recently the energy check and the inflation surcharge: all these measures have led to a profit of almost 120 euros per consumption unit. The middle class has benefited most from these reforms, with purchasing power increasing by more than 7% in five years.
Admittedly, these numbers are averages and can hide stark differences between the French. But the OFCE shows that if the living standard of the 10% of the richest French has increased by 3.2% over the five-year period, that of the most modest 10% has also risen, by about 5.7% after to take into account the unemployment insurance reform which reduced part of their income.
However, if we report these figures not in percentages but in euros, the landscape clearly looks different. The richest 10% have seen their standard of living rise by €2,600 per unit of consumption over the five-year period, while that of the poorest has increased by only €600. Thus, inequality has increased, but the standard of living of each category has improved.
Two crises to face
One of the explanations for this increase in purchasing power can be found in the difficulties Emmanuel Macron faced. His five-year term was marked by two crises: the “yellow vests” and the Covid. It was under pressure from the first, from the Saturday demonstrations in the country’s major cities and from the occupation of the roundabouts, that the government decided to step up measures to boost purchasing power. And it was after the second, the pandemic, that the “whatever it takes” was introduced to protect the wallet of the French in particular.
This trend has a different face: the purchasing power gains have been made possible by a remarkable deterioration in the state of public finances. The government deficit has “increased by 2.2 points of GDP between the second quarter of 2017 and the end of 2021,” emphasizes Mathieu Plane. And government debt rose by nearly 20 points of GDP.
With a question for the future: the war in Ukraine and the rise in commodity prices are reviving inflation, which according to INSEE should reach 4.5% in the second quarter. It is therefore not certain whether the purchasing power performance of the past five years can also be achieved with discounts on fuel prices in the next five years.