A CAE report proposes limiting reductions in social security contributions, raising concern among employers about the potential increase in labor costs.
In a note published this Tuesday, June 16, the Economic Analysis Council (CAE) suggests returning to the reductions in social security contributions. The authors of the report, Antoine Bozio and Etienne Wasmer, note that “the policy of reducing social contributions, which has constituted a central lever of employment policy since the 1990s, is gradually reaching its limits”. For three decades, the State has spent significant sums (74 billion euros in 2026) to reduce the cost of labor to the level of the minimum wage.
This policy has allowed France to simultaneously boast one of the most generous minimum wages in Europe in terms of disposable income (71.9% of the median wage) and one of the lowest labor costs at the same level. However, economists point out that this strategy, while it has favored low-wage employment, has also slowed down the progression of remuneration and compressed salary scales towards the minimum wage.
A race to the bottom effect
The figures illustrate this trend: since the 1990s, the proportion of French people paid the minimum wage has increased significantly. In 1994, only 8.2% of employees received the minimum wage. In 2025, they represented 12.4% of employees, after a record of 17.3% in January 2023. This phenomenon of low-wage traps is at the heart of the CAE’s concerns.
To remedy this, economists advise the government to “gradually but immediately deindex the general reductions in contributions from the minimum wage”. According to Etienne Wasmer, the end of a systematic indexation of reductions on the minimum wage would “reestablish social dialogue” and would encourage salary increases.
Limiting reductions in charges could also replenish part of the state coffers. This question comes at a time when budgetary discussions are coming up and the government has already decided, at the beginning of June, to freeze contribution reductions during the last revaluation of the minimum wage, in response to the acceleration of inflation.
The Economic Analysis Council, placed under the aegis of the Prime Minister, has already presented its work at Matignon and Bercy. A next presentation to the cabinet of Jean-Pierre Farandou, Minister of Labor and Solidarity, is planned in the coming days.
The prospect of a further reduction in tax reductions arouses concern among employers. At the beginning of the month, the freezing of contribution reductions was very poorly received by Medef, CPME and U2P. “Cutting even further on reductions in charges is at the same time anti-business, anti-employment, anti-salary and anti-purchasing power,” complained Patrick Martin to Le Figaro last May. “By thus increasing the cost of labor, the government is directly aggravating the already sharply increasing flow of insolvencies.”
To avoid negative effects on the employment of the most vulnerable groups, Antoine Bozio and Etienne Wasmer recommend in their note to still “keep reinforced reductions for particular groups, who are the most sensitive to integration into the labor market”, in particular young people, whose situation deteriorates from quarter to quarter, and those over 60 years old.
Economists also recommend pursuing “more structural” policies, investing in particular in education but also in housing or transport to promote access to employment.
A changing system
Since January 1, 2026, the contribution reduction system has been renamed “single general degressive reduction” (RGDU). The reduction is maximum for remuneration at the minimum wage level and decreasing up to 3 minimum wage. The gross hourly minimum wage was revalued to 12.31 euros on June 1, 2026, but the calculation of the RGDU continues to retain its value from January 1, 2026, i.e. 12.02 euros, frozen at this level for 2026.
The CAE note thus relaunches the debate on the effectiveness and sustainability of reductions in social contributions, at a time when the executive seeks to reconcile support for employment, control of public finances and salary progression.
