According to the OECD, the purchasing power of gross disposable income increased by 8.5% in France between 2007 and 2021.
The return of inflation has propelled the theme of purchasing power to the top of French concerns. A legitimate concern when the rise in prices should reach 5.5% on average over the whole of the year. Unheard of since 1985.
To try to mitigate the shock on the portfolio of the French, the government presents this Thursday to the National Assembly a law on purchasing power. With various measures supposed to support the most modest households. Not sure that’s enough when INSEE expects purchasing power to decline throughout the year. Which would be a first since 2013.
The purchasing power of the French has nevertheless increased in fifteen years. Between 2007 and 2020, household disposable income (see box) increased by 8.5% in France, according to OECD figures. A lesser increase than that observed in other Western powers such as the United States (+28%), Germany (+13%) or the United Kingdom (+10.5%) over the same period. Conversely, the Italians have lost purchasing power in 15 years (-7.6%), as have their Spanish neighbors (-5.9%).
Basis for calculating purchasing power, gross disposable income is the income available to households to consume, save or invest after redistribution operations. It corresponds to all income (salaries, social benefits, pensions, interest, etc.), from which social security contributions and direct taxes paid by households are subtracted.
Its growth rate corresponds to the change in purchasing power, provided that it is expressed in real terms, ie once the price effect has been eliminated. In fact, the purchasing power with 500 euros in 2022 is not the same as in 2021 with the same sum since prices have increased in the meantime.
In detail, France has experienced three years of decline in purchasing power of gross disposable income over the past fifteen years. This was in 2011 (-0.36%), 2012 (-0.83%) and 2013 (-1.6%), in particular due to tax increases (“fiscal ras-le-bol”) which followed the financial crisis.
The largest increase was observed in 2019 (+2.15%). The following year, thanks to “whatever the cost”, the purchasing power of the French remained stable (+0%) despite the Covid-19 health crisis.
37,231 dollars of gross disposable income per capita in France
In 2020, it was in the United States that the standard of living of households was the highest with an adjusted disposable income* per capita of 58,308 dollars (PPP**). Luxembourg (49,861 dollars), Switzerland (43,062 dollars), Australia (42,554) and Germany (42,433) complete the top 5.
France ranks tenth with an adjusted disposable income of 37,231 dollars per capita, which is 56% lower than that of the United States and 14% lower than that of Germany. On the other hand, it is ahead of the United Kingdom (15th, 35,350 dollars), Italy (17th, 31,807 dollars) and Spain (23rd, 27,557 dollars).
*To compare purchasing power in each country, the OECD uses adjusted household gross disposable income per capita. This indicator takes into account expenditure incurred by public administrations (reimbursement of health costs by Social Security, education expenditure, etc.).
**The OECD expresses its results in purchasing power parity (PPP). It is a currency conversion rate that allows you to compare the purchasing power of different currencies. This rate expresses the ratio between the quantity of monetary units needed from different countries to obtain the same basket of goods and services..
The limits of the measurement of purchasing power
The measurement of purchasing power is regularly contested in the sense that it rarely coincides with the perception of households. One of the explanations is due to the weight of housing in the calculation of the price index. In 2022, this expenditure item weighed 15.5% in the basket of goods and services compiled by INSEE to measure price changes. If this level may seem low, it is because the statistical institute excludes the repayment of mortgages, considering them as investments.
The second reason which may explain the discrepancy between the feelings of households and the statistical measurement of purchasing power is based on the fact that the price index is based on an average basket which does not correspond to the consumption habits of each consumer. . So that some people can rightly say that their purchasing power has decreased while the average purchasing power at the national level has increased.
