Increasing the minimum wage to decrease labor cost ? An analysis by microsimulation for the case of France

This paper analyzes the reduction in total labor costs induced by an increase in the minimum wage in France. Using the Ines microsimulation model developed by the French National Statistical Institute (Insee), I simulate a 2% increase in wages for all workers paid at the minimum wage. Due to the complex of exemptions of the French socio-fiscal system, an increase in the minimum wage leads to a reduction in employers’ social security contributions (SSCs) for workers earning between 1.01 and 3.5 times the minimum wage. I confirm existing results from L’horty (2000): overall, a 1% increase in the minimum wage reduces employers’ SSCs by approximately €1.67 billion.