WAGE DETERMINATION AND THE FRENCH STATE
Steve Jefferys (University of North London, UK) and Sylvie Contrepois (Université d’Évry, France)
Wage determination may be seen at the centre of the creation and distribution of wealth in capitalist societies where it directly dictates the terms of ‘subordination’ and the price of ‘domination’. As such it constitutes a continuing or potential source of conflict over labour costs, the work effort and living standards between employers and employees (Magniadas 1984: 2, 19). The wage determination process was and is, therefore, of major concern to the state, a key policy area in which national governments sought and seek to help ‘their’ employers achieve an international competitive edge while simultaneously securing social peace.
With the ‘national’ interest to the fore over pay determination, it is not surprising that there were only a few references to ‘fair pay’ in the 1961 Social Charter of the Council of Europe, and still fewer in the 1989 Community Charter of Fundamental European Social Rights and in the 2000 EU Charter of Fundamental Rights, where the ‘right of collective bargaining and action’ (Article 28) is extended only ‘in accordance with Community law and national laws and practices’ (our emphasis, EU 2000). Yet as Braud (1999) shows, pay moderation and the development of flexible payment systems have been a constant theme of European Commission recommendations and reports over the last twenty years with, in February 1998, one Commission Communication on growth and jobs even calling for a 20-30% cut in wages for Europe’s least-qualified jobs. Similar themes have also dominated the OECD. Far from state-driven ‘pay policies’ being a relic of a distant Keynesian past, the problem of rising labour force inactivity rates faced by European welfare states like France that rely heavily on payroll taxes for social transfers, has kept the control of labour costs (both their wage and non-wage components) as a central government policy objective (Hassel and Ebbinghaus 2000).
This paper explores the degree of continuity of government intervention over pay in France.[1] It is in five parts. It first sketches in some background to the role of state in pay determination before 1944; it then traces the construction of the core of the contemporary pay formation structure during the period between 1945 and 1950; next it considers state interventions on pay during the economic ‘golden years’ to the end of the 1970s; after that it reviews the 1980s and 1990s; and finally it draws some brief conclusions.
1. Before 1944
Before the second half of the twentieth century it is possible to see four discrete sources of pressure on the French state over wage formation. First, there was the pervasive influence of the highly individualist, generally small-scale, family-owned business, whose discourse often combined liberalism and moralism to justify the payment of the lowest possible wages and controls on worker mobility. This resulted in unions being illegal through most of the 19th century, and workers’ movements between jobs being controlled by a passbook system for nearly 150 years after 1747. A second, less widespread but still important employer pressure emanated from a range of Christian paternalistic ideologies, where workers’ incomes often tended to be distributed in kind (through company housing or schooling or holidays for workers’ children) or even ‘deferred’ through forms of investment in their company. Of the world-wide figure of 267 experiments in profit sharing in 1905, 115 took place in France, where during the First World War enabling legislation was passed to encourage worker participation (BIT, 1923).
A third source of pressure for state intervention came from the emergence of the French trade union movement. This appeared with the spread of socialist ideas and accompanying labour shortages towards the end of the 19th century. The shortages occurred because both peasants and workers increasingly practised birth control, while the sub-division of peasant land between all the surviving children also tended to slow down migratory pressures from rural to urban France.[2] Within a low-wage economy they created a relatively high price for unskilled labour: real wages rose almost continuously between 1860 and 1905 while differentials between skilled and unskilled labour fell between 1900 and 1920. Where unions were formed the low differentials discouraged the formation of separate skilled workers’ unions, favouring instead industrial or trade-wide unions of all workers, regardless of skill. The shortages also encouraged the use of women workers (the proportion in industry rose from 30% in 1866 to 37.5% in 1906); and it gave the emerging workers’ movement just enough industrial and political muscle to mount occasional dramatic displays of resistance to their subordination without giving it sufficient unity and strength to force the employers to provide many of the permanent improvements in workers’ rights that were beginning to occur elsewhere (Sellier 1984: 15-40).
Another consequence of these shortages, in the context of universal male suffrage and growing urbanization, was several direct and indirect state interventions on wages and wage formation from the 1880s on. Thus on August 10 1899, in an important move towards the construction of French paritarism (partnership), a decree required government suppliers to guarantee that they paid ‘normal’ wages, the averages within their locality with what was a ‘normal’ level being decided by ‘observatories’ made up of employers and workers (Lyon-Caen 1967: 14-15). Sellier (1984: 74) sees the 1899 law as the ‘first attempt at fixing a minimum wage’. Later, during the First World War, when once more faced with acute labour shortages as well as with appalling conditions in the putting-out and sweated trades making military clothing, the government passed the law of July 10 1915 establishing a minimum wage for domestic workers in the clothing industry. Its main aim was to reduce the traditionally very important gaps in wage levels between those received by domestic workers and those in factories, but it also set up a procedure for this to happen: the level in each department would be determined by the recommendations of local committees of workers and experts (Ray 1999: 1-6).[3] After the war, during which there had been considerable amount of state direction of wages through joint committees of employers and trade unionists, labour shortages combined with a brief post-war boom and growing labour agitation to pressure the government in 1919 to make its first attempt at creating a legal structure for collective bargaining between employers and unions. The law of March 25 1919 was, however, minimalist: agreements only applied to member firms of employers’ associations, no other employer could be obliged to respect the agreements, and any member firm could always resign if they did not wish to pay the minimum wages or work the patterns of hours agreed. As unemployment increased fewer employers felt constrained to negotiate or abide by the agreements and by 1934 only four percent of industrial workers were still covered by an agreement (Dewerpe 1989: 166).
In 1936 the balance of forces in France between capital and labour was transformed by the huge working class mobilizations at the ballot box in the elections of April-May (leading to the Popular Front socialist government) and in the following factory occupations. The result was a new logic of direct state intervention on wages. The Matignon agreement of June 7 1936 between the government, the national employers organization and the newly re-united national trade union confederation (the CGT) not only laid down that workers should be entitled to two weeks’ annual paid holiday a year, the 40-hour week and elected personnel delegates, it also stipulated that wages should rise by an average of 12% and that ‘the new collective agreements must include in particular the necessary adjustment to abnormally low wages’ (our emphasis, quoted in Sellier 1984: 182). The subsequent law of June 24 1936 was a breakthrough because it specified that the collective agreements to be negotiated should lay down minimum wages for each level of worker in the industry and included the possibility that the agreements reached between the negotiating parties could be extended by Ministerial order to all firms within the particular industry or region. It thus created a state mechanism for generalizing standard minimum rates for all workers (Magniadas 1984: 105-6).
The fourth source of pressure on the French state to intervene on wages derived from the challenge of war to its very survival. The state had initiated tripartite wage setting in the First World War, and as the Second approached it became clear that it would mark a break from the newly-established ‘free’ collective bargaining with a further advance of state intervention. On September 1 1939 the government suspended the collective agreements made since 1936 (and on September 26 it banned the Communist Party), and between November 10 1939 and June 1 1940 it issued a series of ministerial decrees fixing wages at the level they were at the outbreak of war (Lyon-Caen 1967: 17). After the German Occupation and the establishment of the Vichy regime, on November 9 1940 both unions and strikes were made illegal. Initially wages continued to be set by the Ministry of Labour (but without the tripartite expert committees), but this power was soon delegated to departmental prefects. The reality, however, was that Vichy had no enforcement mechanism to maintain its wage policy outside the public sector and despite the formal presence of state controls individual employers largely followed their own instincts. And these, in an atmosphere of acute physical repression, were to pay as little as possible. By 1944 wages only purchased half of what they had in 1939 (Magniadas 1984: 105-7; Sellier 1984: 186-7).
State intervention on incomes before 1944 thus generally meant active support for laissez-faire and the ‘rights’ of managers to decide individually how much to pay workers in their companies. In response to labour shortages and in particular to industrial unrest, governments made some small moves towards institutionalizing arbitration and negotiating procedures, but before 1936 these remained optional. The Matignon agreement of 1936 and the period of direct government control from 1939, however, broke this pattern, effectively outlining a new pay determination framework.
2. 1944-1950
If the basic concepts guiding state intervention on wages in France since the Second World War were elaborated in 1899, 1915, 1936 and 1939, detailed implementation took place in the period of acute economic and political crisis after D-Day on June 6 1944, when once again France had witnessed a dramatic shift in the political balance of forces towards the working classes.
As the allied armies and the resistance liberated France in the months after D-Day, the provisional government began to issue regulations covering the administration of the new post-war France. Wage and price controls were high priorities, and on August 24, the day before Leclerc’s Armoured Division entered Paris, regulations were issued renewing the wage and price controls of September 1939 and restoring trade union legality. This regulatory regime, involving a total wage and price freeze with exceptions permitted only by ministerial decree, survived for five years. The decrees permitted increases in both minimum rates and real wages, but specified that the average wage within each skill grade could not exceed the minimum wage for that grade by more than 20%. In sectors where the average wage was close to the minimum wage, however, higher wage rises were allowed, creating a considerable amount of leeway for tripartite ‘discussions’ between the trade unions, employers’ representatives and civil servants from the Ministry of Labour (Sellier 1984: 187).
The most significant of all the wage determination regulations introduced soon after Liberation when Communist influence on the government was at its zenith, was a national job classification system, known as the Parodi-Croizat grille. It was named after the Gaullist minister, Alexandre Parodi, who first decreed it in April 1945 and the Communist Minister of Labour, Ambroise Croizat, general secretary of the CGT’s engineering workers federation since 1928, who subsequently amended it. Their alliance is explained by a temporary coalition of interests: at first the state, the employers and the PCF all wished to restrict the extent of bidding up for scarce labour of wages and rising piece-work rates (Mottez 1962: 273), while workers generally wished to avoid returning to an ‘unfair’ system that paid higher rates to certain employees only. Structured on the lines of the 1936 Paris engineering collective agreement the Parodi-Croizat grille divided workers according to their skill levels as determined by the amount of time they had spent in apprenticeship training.[4]
The Parodi-Croizat grille’s importance in post-war wage formation is twofold: it institutionalised the importance of training in wage formation, enabling workers who gained new qualifications to automatically move up a classification level; and it was to become the standard for all wage structures. It was initially generalised by state decrees, and later it was inserted into virtually all the collective agreements that the government confirmed and extended (thereby giving them force of law). By the 1960s most French firms used it or a close variation and even today its derivative forms are still in general use. Its survival is testimony to the fact that while it was an initial restraint on the employers, who were obliged to pay their employees on clear transparent criteria and were not allowed to pay significant levels of bonus on top, it could also be easily adapted to the job evaluation systems that became increasingly popular from the 1970s (Magniadas 1984: 715-7).
Eventually the continuation of tight official wage controls in a context of rapidly rising real prices led in 1949 to the complete breakdown of the centralised Ministry of Labour wage control system as employers began to use more flexible forms of wage-setting to unblock labour shortages and exercise greater control over their workers. The government responded with another, ultimately more enduring attempt at creating a collective bargaining framework. The law of February 11 1950 applied only to the private sector, specifically excluding not only civil servants but also many workers in the now very large public service sector, such as the railwaymen, miners, electricity and gas workers. Magniadas (1984: 785) argues that the1950 law profoundly influenced French industrial relations and pay determination. It confirmed the state’s power to decide whether to extend agreements to all, thereby giving a law or rule-making status to the negotiating process; it gave ‘representative’ unions a monopoly in determining collective agreements; it gave minority unions the right to conclude agreements once they were recognized as ‘representative’; and it gave the negotiators the right and duty to fix sectoral minimum wages and classifications while keeping for the state the exclusive right to set a national minimum wage. It effectively institutionalised a form of ‘arms length’ bargaining that recognised the unions nationally but kept to a minimum any form of real recognition at the workplace. The 1950 law went further than had that of 1936. Under the 1936 law it had merely been the responsibility of each sector to agree its own minimum, but in the changed political circumstances of post-war France the 1950 law also ensured that the ‘national interest’ was taken into account in wage determination by establishing a national minimum wage, the SMIG (salaire minimum interprofessionnel garanti). It was this change that explained the main French Employers’ Association’s ambivalence about the 1950 law, which otherwise gave them pretty much what they wanted: free collective bargaining in a period in which (from 1948) France’s biggest union, the CGT, had just split into two. The CNPF argued that while the law still reflected ‘a tenacious dirigisme in effect by allowing the state to establish an intersectoral minimum wage’ (cited in Magniadas 1984: 116).
While the national minimum wage was established at a very low level and there is little evidence of the SMIG (or its successor the SMIC) ever setting the general rate of pay increases, its importance should not be underestimated. Morin (1998) argues that it affirmed the critical role of the state in post-war economic life and that it clearly orientated the state towards the universal system of legal regulation of society that underlay the growth of the post-war welfare state. Thus by the end of 1950, although the French state had formally retreated from direct wage regulation, it had established several important measures helping shape the future of wage determination. In particular it had defined a sectoral structure to collective rule-making over wages, and it had defined a minimum wage level that was applicable to all.
3. 1950-1980
The period from 1950 to 1978 was one of nearly continuous economic growth in France during which purchasing power of the average net salary rose by an annual 4.3% (Friez 1999: 154). Yet the abandonment of centralised wage direction over the private sector in 1950 did not mean that the French state withdrew from wage determination. It still had to determine the level of the national minimum wage and daily responsibility for incomes in the growing government and public sectors, but it continued to regularly intervene to control inflation and to discipline French employers to modernise their employment relations and to lower their labour costs.