Cet ouvrage fait partie de la bibliothèque YouScribe
Obtenez un accès à la bibliothèque pour le lire en ligne
En savoir plus

Intéressement et salaires : complémentarité ou substitution ? (version anglaise)

17 pages
Selon la législation française, l'intéressement s'ajoute au salaire. On devrait donc observer, dans les entreprises qui pratiquent l'intéressement, une rémunération totale plus élevée, mais pas de différence significative de la rémunération de base avec celles qui ne le pratiquent pas. Si, de plus, l'intéressement détermine des gains de productivité, les rémunérations de base devraient être aussi plus élevées là où l'intéressement est mis en place. C'est bien ce que l'on constate, sur l'année 1992, pour les établissements de plus de 200 salariés. Cependant, pour les établissements plus petits, le salaire de base accompagnant l'intéressement n'est pas plus élevé, voire souvent même plus faible, que celui établissements qui ne pratiquent pas l'intéressement. En fait, avec le temps, une certaine substitution semble s'effectuer. L'effet positif de l'intéressement sur les rémunérations totales diminue avec l'ancienneté des accords. Il devient même significativement négatif pour les salaires de base au bout de trois à cinq ans. L'intéressement s'avère donc bien être, pour les entreprises, un dispositif de flexibilisation salariale.
Voir plus Voir moins

Profit Sharing and Wages:
or Substitution?*
Sylvie Under French law, profit sharing is paid in addition to wages. One would therefore
Mabile** expect to find higher total remuneration in profit sharing companies, with a basic
wage not significantly different non profit sharing firms. Moreover, if profit
sharing determines productivity gains, basic wages should also be higher where
profit sharing is practised.
This is indeed the finding for establishments with more than 200 employees in
1992. However, the basic wage accompanying profit sharing in smaller
establishments is not higher and is actually often lower than in those
establishments without profit sharing schemes.
A certain substitution would appear to be taking place over time. The older the
contract, the lesser the positive effect of profit sharing on total remuneration. After
three to five years, it even has a significantly negative effect on basic wages.
Hence profit sharing acts as a wage flexibility mechanism for businesses.
iece wages, which used to be a fundamentaldevelopment of profit sharing (voluntary
*Originally published as Pemployee production incentive, have profit sharing agreements, see appendix I).“Intéressement et salai
res : complémentarité disappeared over the years. Today, they are
ou substitution ?,” Éco
found only in a few sectors (clothing, shoes,This wage policy lever is often seen as a way of
nomie et Statistique ,
etc.). Changes in job types, technological encouraging employees to share in theNo. 316 317, 1998
**Sylvie Mabile was advances and social progress led to a certain company’s goals. Greater employee involvement
with the DARES when
uniformity in the wage increases given by is thought to increase labour productivity.
she wrote this study.
companies, at least through to the early 1980s.
The trend has since turned around with a moreIn the mid 1980s, M. Weitzman’s theory
changeable, diverse demand and fiercer altered the nature of the debate on the effects of
competition driving a new search for flexibility profit sharing. He posited that the introduction.
At the same time, and this process is not of a variable wage proportion indexed to profit
peculiar to France, wage negotiations in lowers the “marginal labour cost” (the fixed
companies and even their establishments are part of the wage, i.e. essentially the basic wage)
becoming decentralised. Corporate wage and increases the demand for labour and
Names and dates in policies are becoming both more targeted, withcorporate production. Widespread profit
parentheses refer to the
the development of flexible individual wages, sharing in these terms is therefore a solution tobibliography at the end
of the article. and linked to group performances, with the the unemployment problem. However, such a
INSEE Studies no. 40, October 1999 1mechanism has to be promoted by the below market levels. In other words,
government since it cannot be spontaneouslyprofit related bonuses are paid in addition to
adopted in an uncoordinated decision making basic wages. M. Weitzman’s theory thus does
structure. not apply, in principle, to France. The
employment promoting, cash profit sharing
French law encourages profit sharing schemes, schemes he studies are based on reducing the
especially the scheme introduced in 1959, fixed part of the wage.
whose use has spread widely since a 1986 edict.
However, this particular scheme is associated withHowever, this theory could become relevant
the fundamental principle of non substitution foragain if profit sharing were to limit subsequent
the wage to offset its random nature. Frenchwage rises. Such is the suggestion of an
lawmakers felt that promoting profit sharing empirical analysis of 1992 wages accompanied
initially required equity considerations (social by official data on profit sharing. It finds that
harmonisation between capital and labour withthis “gradual substitution” concerns more
the surplus shared among all employees) andparticularly companies with less than 200
employee motivation (to encourage productivity). employees.
They also encouraged corporate savings plans,
for example, by only exempting employees
Can profit sharing have an adverse effectfrom taxation on the sums paid if they had been
saved in the company for five years. By on wages in the medium run?
promoting such an element of variable
remuneration, French lawmakers actually In practice, there is nothing to prevent profit
1discouraged reducing the fixed part of the wage sharing from interacting, even implicitly, with
to make up for profit sharing bonuses. subsequent wage rises (whether negotiated or
not). For example, if an upbeat economic period
is such that employees receive significant
The legal principle of non substitution bonuses fairly regularly, basic wage claims
might be lower in these companies than they
The principle of non substitution of profit would be if there were no profit sharing. The
sharing for wages has always been clearly late 1980s are a good example of an economic
stated. The scheme comprises measures that upturn whereby a large proportion of companies
prohibit substituting profit sharing for part of were able to pay profit related bonuses (91% to
the wage or existing bonuses. Under the current 96% of companies with an agreement) and the
legislation, it is impossible to adopt profit average sum paid to each recipient was relatively
sharing less than one year after eliminating anhigh (approximately 4,900 FF or 1.2 months of
element of remuneration (Law of 1994). Thethe net minimum wage on average for the 1988
government can check on this and revoke the and 1989 financial years).
right to tax and social security concessions
normally granted. Case law in profit sharing Eventually, and especially in an economic
has also developed considerably in this regard.turnaround, it is possible that any induced
It stipulates in which cases exemptions grantedrestraint on basic wages would no longer be
can be reclaimed should the profit sharing be offset by profit related bonuses, which are
“converted” into a wage (see the annual reports haphazard by nature. This could then lead over
of the Conseil Supérieur de la Participation). time to a real drop in the marginal labour cost
and even in the average labour cost. Profit
The consequence of the principle of the sharing, in spite of the non substitution clause,
non substitution of profit sharing for wages is a would therefore become a real wage flexibility
principle of the independence of wage mechanism.
negotiations from profit sharing negotiations.
The former are held by union representativesThis is the question studied in this paper using
2once a year and concern mainly large companies. an empirical approach. We endeavour to find
The latter are held once every three years ansome answers to the following two qued stions.
may be ratified by the entire staff, which is
generally the case in small companies. 1 The employer’s total labour cost is nevertheless reduced by tax
and social security concessions on profit related pay.
2 Since the law of November 1996, companies without unionIt can therefore be assumed that this
representatives may also sign wage agreements subject to
non substitution ensures that profit sharing certain conditions (sector check). This is a three year
companies do not normally pay basic wages experimental scheme.
2 INSEE Studies no. 40, October 1999Do profit sharing companies pay lower or Lastly, a dynamic element was introduced into
higher wages than other companies, other the analysis by adding official data to the 1992
things being equal? If there is a deviation, does survey to study individual employee wages
it depend on how long the profit sharing according to how long the companies
agreement has been in effect? employing them had been profit sharing. In
other words, wages are analysed by
If profit sharing is perfectly complementary to“profit sharing cohort” identified by the date of
wages, basic wages should not be lower in the first agreement signed. Companies wishing
profit sharing companies regardless of their to secure the tax and social security advantages
profit sharing methods, except where the profitof profit related pay are bound to file their
sharing is adopted by the least productive profit sharing agreements with the regional
companies (with the lowest initial wages). Thisdepartments of employment. One problem
assumption should be able to be tested usingremains, however. This date is only known if
data available on the 1992 financial year. The the agreement has been entered into the central
choice of 1992 is because the economy slowedfile and the company has not changed its
down in this year, with the lowest point of tidentification details since its first agreement. Ahe
cycle being in 1993. If the wage differential“date unknown” option was thus created for
between profit sharing and non profit sharingprofit sharing companies not found in the
companies is found to vary with the age of tofheficial file. This concerns less than one quarter of
first agreement, we could deduce that profit the sample’s employees in profit sharing schemes.
sharing influences wage setting. A decreasing
relation could be the sign of a certain “gradual
In 1992, total wages were higher substitution” of basic wages (the “fixed” part of
the wage deemed to be the marginal labour in profit sharing companies
cost) for profit sharing.
The econometric analysis presented in this
Two sources of information were used for thiarticle covers a sample of approximatelys
study: individual data from INSEE’s 1992 111,500 employees for whom individual
Wage Costs and Structur survey and the panele information (qualifications, age, seniority, etc.)
of companies put together by DARES from and the characteristics of the companies and
government feedback on profit sharing establishments employing them are available
agreements and rounded out by annual surveys(see appendix II). Some 29% (nearly 32,000) of
of profit sharing (panel updated in 1995; seethese employees were covered by a
appendices I and II). The use of 1992 profit sharing agreement and were
provides a certain amount of hindsight with consequently likely to receive a bonus. In 1992,
regard to the 1986 edicts, which encouraged the21% (nearly 23,500 employees) actually
profit sharing boom. Companies could have received such a bonus. This proportion of
signed two or three agreements since this date, recipients is similar to that found by the DARES
since agreements are signed for three years atannual profit sharing survey (PIPA survey:
a time. 68% of the employees covered received a
profit related bonus for 73% of the companies).
Moreover, profit sharing is observed in a slump In 1992, other individual characteristics being
period of the business cycle with the economy equal, the total remuneration of an employee
on the downturn compared with the late 1980s.covered by a profit sharing agreement, all
Most previous empirical studies of profit bonuses included (together with profit
sharing in France looked at the period from sharing), was 3.6% higher than that of an
1987 to 1989, i.e. shortly after the mechanismemployee working in a similar establishment
gathered speed in an upbeat economic climate.without a profit sharing agreement. More
It was therefore hard to test for any downwarpreciselyd , the deviation was 4.3% for companies
3 wage flexibility over this period. For example,that paid a profit related bonus in 1992 and 1.3%
the DARES annual profit sharing survey foundfor those that did not. The total remuneration
that over 9 in 10 employees covered by an surplus was thus not entirely due to the
agreement received a profit related bonus inpayment of the profit related bonus (see table 1).
the late 1980s as opposed to 7 in 10 in the
1992 financial year. Moreover, numerous
companies did not renew their first agreement
3 By way of comparison, the PIPA survey reports that the average
in 1992, generally because of the economicprofit related bonus in 1992 accounted for 2.7% of the payroll of
downturn. profit sharing companies.
INSEE Studies no. 40, October 1999 3However, the human resources management - the most frequent situation where an
method, of which profit sharing is a part, isagreement is found their total remuneration is
closely associated with corporate size. significantly higher across all company sizes
Significant disparities could thus be expectedthan that of employees not covered by a
between the effects of profit sharing on wages.profit sharing agreement. Particularly large
So this general analysis has been rounded out deviations of nearly 6% are found among the
by size based analyses. Profit sharing is large companies with 500 or more employees.
probably chosen by different companies for In companies with less than 500 employees,
different reasons (efficiency wage and transferthey vary from 1.5% to 4% of total
of risk, see Perotin and Fakhfakh, 1993) andremuneration.
used in different ways (choice of indicators
used in the formula, distribution method, There are also huge profit sharing disparities
frequency of distribution, information to from sector to sector, due partly to differences
employees, etc.). Moreover, the probability ofin sector concentration, market share, etc.
adopting profit sharing increases considerably Similar sectoral analyses were therefore made
4 4All the studies confirm with the size of the company (see appendix I).of 37 sectors grouped by their collective
this fact as well as the agreements (see table 2). Although an average
simple demography by
The significant remuneration surplus observed of 29% of the employee sample is covered by acompany size
presented each year in for all employees covered by a profit sharingprofit sharing agreement, this proportion
the findings of the agreement, but not receiving a bonus for thevaries a great deal from sector to sector: from
profit sharing survey.
1992 financial year, is thus not found for all3% (industrial safety and hospitals) to 79%Our sample also shows
company sizes. It is only found among the (banks). In metallurgy, fuel (oil) and the food
smallest companies (less than 20 employees) trade, more than half of the employees are on a
and the “medium sized to large” companies profit sharing scheme. Yet the percentage
(200 to 500 employees) (see table 1). However drops to less than 12% in construction, which is,
where employees receive a profit related bonuslower than in all the industrial sectors. So
Table 1
Total remuneration was higher in profit sharing companies in 1992
Company size (in number of employees)
Effect of profit sharing (1)
less 50 100 200 500
20 to 49 Overall
than 20 to 99 to 199 to 499 or more
- On total remuneration
(a1): all profit sharing companies 2.7** 3.2** 2.4** (1.0) 3.6** 4.7** 3.6**
Adjusted R2 (2) (0.29) (0.36) (0.41) (0.45) (0.43) (0.45)
of which (b1) no bonus paid 3.2* (1.0) (1.0) ( 0.1) 2.9** (0.7) 1.3**
bonus paid 2.4** 3.9** 3.0** 1.5* 3.8** 5.9** 4.3**
- On basic wages
(a2): all profit sharing companies ( 2.6) -0.9 1.0 1.6* 1.1* 2.4** 0.5*
Adjusted R2 (2) (0.22) (0.27) (0.36) (0.34) (0.39) (0.41)
of which (b2) no bonus paid ( 1.1) 2.5* ( 0.4) 3.0* (0.5) (0.3) 1.0*
bonus paid (0.1) ( 0.4) 1.5* ( 0.9) 1.2* 3.0** 1.1**
Employees in the sample (number) 25,513 25,957 13,222 8,392 14,919 23,493 111,496
in the profit sharing companies (%) INT 10 % 17 % 25 % 32 % 42 % 54 %29 %
of which: no bonus paid INT1 3 % 4 % 7 % 8 % 10 % 14 % 8 %
bonus paid INT2 7 % 12 % 18 % 23 % 33 % 39 % 21 %
1. Coefficients multiplied by 100 for the INT variables (resp. INT1 and INT2) in models a (resp. b) presented in appendix III.
Coefficients marked ** are significant at 1%, * at 5% and ( ) are insignificant at 10%. The determination coefficients (adjusted R2) for
models b1 (resp. b2) are not given (similar to models a1 (resp. a2) for each sub sample).
Reading: In the overall column, given identical individual characteristics, an employee in a profit sharing company received a pproxima
tely 3.6% more total remuneration in 1992 than an employee in a similar non profit sharing company. The surplus is 4.3% company if the
paid a bonus in 1992 and 1.3% if it did not.
Sources: INSEE survey on the structure of wages in 1992 and the DARES DRT profit sharing panel (1996).
4 INSEE Studies no. 40, October 1999Table 2
The effects of profit sharing on total remuneration and basic wages vary by sector
Coefficients (x 100) (1)
% of employees on profit
Sample sharing (2)
Collective agreement (No. of Total remuneration Basic wages
Int Int1 Int2 Int Int1 Int2 Int Int1 Int2
01 Metallurgy 16,622 53 18 35 2.3* - 0.9 4.1* (0.1) - 0.8 (0.6)
02A Building 6,119 12 5 7 0.8 ( 2.3) (0.1) (0.5) ( 1.5) (1.7)
02B Public works 1,711 46841 .3* (3.2) 5.1 (0.8) (- 0.4) (1.7)
03 Chemicals fertilizers pharmaceuticals 3,714 54 17 38 6.2* 8.9* 5.5* 5.3* 4.6* 5.5*
04 Plastic 900 31 6 25 - 3.8* 7.2* ( 2.6) ( 2.6) 8.0* ( 0.6)
05 Rubber 863 20 4 16 5.4* (3.2) 6.0* 10.9* 15.8* 9.6*
06 Fuels (oil, etc.) etc.) 600 59 33 26 10.9* 13.8* 8.0* 9.0* 16.3*
07 Building materials 1,057 24 9 15 7.8* 7.7* 7.9* 3.6* (1.1) 5.2*
08 Glass 747 47 9 38 - 7.2* 8.1* 7.1* 8.1* 9.5* 7.9
09 Wood 1,541 22 4 18 (0.7) (5.1) ( 0.6) ( 0.3) 8.4* ( 1.4)
10 Paper and cardboard1 1,016 47 15 32 3.9* ( 2.5) 7.4* (0.3) ( 2.2) (1.6)
11- Printing and publishing presse, édition 1,884 16 4 12 - 6.2* ( 2.9) 7.4* 6.3* ( 5.2) 6.7*
12 Textiles and clothing 2,821 23 9 14 7.3* 6.5* 7.7* ( 0.8) (0.2) ( 1.3)
13 Leather and shoes 570 15 10 5 17.1* 12.0* 22.9* (1.8) ( 1.9) (6.0)
14 Food industry 4,335 29 6 23 9.1* ( 2.0) 11.6* 8.1* (2.7) 9.3*
15 Wholesale trade 1,567 16 6 11 4.1* 8.4* (2.0) ( 0.2) 6.3 ( 3.3)
16 Food trade 2,872 59 9 50 - 2.2* 4.6* ( 1.3) 3.3* 6.9* 2.1
17 Non food trade 1,526 40 8 31 ( 1.0) 6.1* (0.7) ( 2.7) 12.7* (0.7)
18 Motor vehicle trade 3,069 14 7 7 ( 2.0) 5.3* (0.2) ( 2.2) 3.8 ( 1.1)
19 Hotels catering and tourism 1,958 31 7 24 - 2.5 ( 3.8) ( 2.2) 7.1* 11.5* - 6.1*
20A Road transport 6,617 17 6 12 7.0* 10.3* 5.5* 3.1* 2.8 3.3*
20B Non road transport 1,860 50 5 45 - 3.7* 5.4* 4.8* 5.1* 13.3* 4.0*
21A Health care 4,543 8 1 7 6.8* (1.5) - 7.5* 3.3* (2.7) - 3.8*
21B Hospitals 3,143 3 0 2 (0.4) - 25.0* (3.6) - 6.1 - 17.8 ( 4.6)
22 Financial firms 1,995 79 25 53 6.0* 8.6* 5.0* 7.2* 9.6* 6.2*
23 Insurance 1,752 31 6 25 - 3.1* 12.0* ( 0.8) 8.0* 12.8* 6.7*
24 Real estate and council housing 863 36 4 32 ( 1.6) ( 0.1) ( 1.8) 3.1 (7.7) (2.4)
25 R&D and consultancy experts 1298 16 8 8 (0.1) (2.6) ( 3.0) ( 1.6) (2.1) - 6.1*
26 Legal professions and accountants 1, 821 10 1 9 ( 2.9) (6.9) - 4.3 ( 1.4) 13.3* ( 3.5)
28 Cleaning and salvaging 2,511 13 2 11 ( 0.4) (1.2) ( 0.7) 3.1 ( 0.0) 3.6*
29 Safety at work 383 3 - 3 11.5 - 11.5 12.4 - 12.4
30 Miscellaneous sectors 2,823 16 5 11 7.2* (0.1) 10.3* 5.4* 6.1* 5.1*
31 Agricultural sectors 1,594 40 6 34 - 3.3 10.0* 6.9* 5.7* 7.5* 5.2*
33 Special status public establishments 7,855 25 2 23 12.0* (1.2) 13.0* 6.2* ( 1.9) 6.9*
34 Other national collective agreements 2,444 31 4 27 4.8* 12.1* 3.7* ( 0.8) 1.1* ( 2.5)
99 No sector agreement 1,980 20 6 14 - 4.5* 5.6 ( 3.9) 8.4* 13.2* 6.1*
NR No reply 12,522 17 3 14 12.1* 2.8 13.9* 8.4* (0.6) 9.9*
Overall 111,496 29 8 21 3.6* 1.3 4.3* 0.5* 1.0* 1.1*
1. Wage equations (in logarithms) excluding executives and apprentices: the equations (see appendix III) are estimated for and all
each one of the 37 homogeneous sector sub samples.
The coefficient * is significant at 5% or less and ( ) is not significant at 10%.
2. Definition of the variables:
Int: employees in a profit sharing company (with or without a bonus in 1992),
Int1: employees in a profit sharing company without a bonus in 1992,
Int2: employees in a profit sharing company with a bonus in 1992.
The “overall” equation includes the sectoral dummy variables.
Sources: INSEE survey on the structure of wages in 1992 and the DARES DRT profit sharing panel (1996).
INSEE Studies no. 40, October 1999 5although the same equations are used for all thethis observation needs to be qualified,
sectors, the effects of profit sharing are especially with regard to company size.
compared with reference situations (employees
in companies with no profit sharing
Profit sharing has a more negative effectagreement) that vary enormously from one
sector to the next. in companies with less than 200 employees
Nevertheless, a general trend can be determinedBasic wages in companies with less than 200
from these analyses. In the vast majority of employees are on the whole lower than in
sectors, the specific effect of profit sharing oncompanies without profit sharing (a deviation
total remuneration is positive. However, there areof -1.6% for companies with 100 to 200
some significant exceptions. The effect is employees), especially when no profit related
negative in approximately one quarter of the bonus is paid (see table 1). Yet profit sharing in
sectors, in particular in plastics, glass, printing,large companies is paid in addition to basic
the food retail trade, non road transport, banks wages that are generally higher than those in
and insurance and in establishments with no non profit sharing companies. In 1992, the
collective agreement (according to the INSEE deviation was 2.4% in establishments with 500
5 5 Special status public survey). or more employees and 1.1% in establishments
establishments identified with 200 to 500 employees. The same
as such are not included
establishments pay both high basic wages andin this category.
The effect of profit sharing on basic profit related bonuses: the employees who did
wages is more ambiguous not receive a profit related bonus in 1992 were
not paid a significantly higher basic wage than
If profit sharing is perfectly complementary totheir opposite numbers without a profit sharing
wages in the short and medium run, there agreement. In large units, therefore, wage
should be no significant differences in basic flexibility does not appear to be the main aim of
wage levels between employees covered by a profit sharing. The way in which is it practised
profit sharing agreement and those not would seem to confirm this hypothesis:
covered. Or at least, basic wages should not beprofit related bonuses are lower on average,
lower where profit sharing is practised. In fact, but there is a higher probability of distribution.
wage deviations can also reflect productivityThey would appear to be paid more to
deviations between firms. However, most of encourage employees to commit to their work,
the studies on France posit that, if such a by subscribing to the company’s goals (in a
selection bias were to exist, it would be more wage policy based on the efin ficiency wage), and
favour of profit sharing companies. In practice,out of a concern for equity (by distributing
the estimates for 1992 find ambiguous effects.interim profitability gains).
Basic wages were higher in companies that paid
profit related bonuses (+1.1%), but lower in Yet small and medium sized companies, more
companies that did not even though they had a sensitive to economic ups and downs, probably
profit sharing agreement ( 1.0%). Since the look more for flexibility (and tax concessions).
first situation is the most frequent, the level The bonuses they distribute (when they do so)
of basic wages is generally slightly (but are on the whole larger, but more random. This
significantly) higher in companies with a could explain the relatively lower level of basic
profit sharing agreement: +0.5%. wages in profit sharing companies with less
than 200 employees: wage adjustments could
It is thus the most dynamic companies that pay be made more by supplements to wages such as
both profit related bonuses (which requires profit sharing, which would eventually alter the
positive profitability) and high basic wages. fixed part of the wage. Overall, however, the
This first observation therefore presents profit 1992 data suggest that this fixed part is more
sharing more as a surplus remuneration in than offset by the supplements to wages even
keeping with the legal notion whereby profitwhen the loss to basic wages is significant.
sharing is not a wage. Profit sharing in France
could therefore be said to be more of a
The effect of profit sharing varies mechanism designed to raise productivity than
a “Weitzman” mechanism to increase a great deal from one sector to the next
employment via a reduction in the marginal
labour cost brought about by a profit At sectoral level (37 sub samples derived from
sharing wage substitution (see box). However, groups of collective agreements), it is harder to
6 INSEE Studies no. 40, October 1999come to a general conclusion about the link Who adopts profit sharing? If the answer is the
between profit sharing and basic wages. Themost productive (or profitable) firms, then
relation often appears to be insignificant, butwage levels should be found to be higher in
the size of the samples studied is also smaller companies intending to adopt profit sharing in
than in the above analysis by company size (seethe near future than in those with no profit
table 2). The effect of profit sharing is sharing. The relation could also depend on
insignificant in one in three sectors, such ascertain characteristics such as size.
metallurgy, which is the main reference for
sector collective agreements. However, it is Also, and this is not contradictory, if profit
also negative in one in three sectors such assharing is a source of productivity and if these
glass, printing, the retail trade, hotels and gains are redistributed, at least in part, among
catering, non road transport, financial the employees, then the total wages of
intermediation and establishments without a profit sharing companies should be higher than
collective agreement. In these sectors, even thethose of companies that have not yet adopted it,
total wages are lower where there is profit aside from if the least profitable firms are the
sharing. Lastly, both basic wages and total ones that adopt profit sharing. Moreover, wages
wages are higher where there is profit sharinshould increasg e with the length of time the
in chemicals, rubber, oil, building materials, agreement has been in effect, assuming that
the food industries, road transport and specialthese productivity gains are not solely
status public establishments. temporary.
These findings all go to make up a complex If there is no medium-term substitution
table. When basic wages are lower where between wages and profit sharing, basic wages
profits are shared, it could be assumed that the should be independent of the length of time the
agreement was signed when basic wages wereagreement has been in effect or should possibly
already relatively low (for greater flexibility)increase with this length of time as a result of
or that a certain gradual substitution has come cumulated productivity gains. However, these
about between profit sharing and basic wages.expected effects assume a certain stability in
Conversely, higher total wages could be due tothe profit sharing/productivity/wage relations
an effect induced by productivity gains during the observation period from 1986 to 1994.
themselves ascribable to profit sharing or to the
most profitable companies’ being more
The firms that pay the highest wagesinclined to adopt profit sharing. It is therefore
hard to draw any conclusions from a simple are not generally those that adopt profit
static analysis and this complex table must be sharing
clarified by the introduction of dynamic
elements: how long has the profit sharing In 1992, em ployees in companies about to adopt
scheme been running? a first profit-sharing agreement (to be signed in
1993 or 1994) did not receive significantly
different remuneration to employees in
Do effects differ by the length of time non profit sharing companies. Their basic wages
the profit sharing has been in place? were even slightly lower on the whole ( 1.6%;
see table 3).
If we assume that there is a link between the
level of wages paid by companies and labour This finding contradicts the sometimes widely
productivity, we can partially discern the held belief that the most productive firms adopt
causality between performance and profit profit sharing (always with the assumption of a
sharing. This can be done by comparing wage redistribution of productivity gains to employees).
levels paid by non profit sharing companies In fact, profit sharing is a negotiated instrument
firstly with those scheduled to adopt profit in France and it is normally easier for company
sharing in the near future and secondly withheads to get an agreement ratified when there is
those that have just adopted it or have beenprofit to be shared. In the 1993 DARES survey
practising it for a number of years. Yet it is t ohfe 80 profit sharing companies, most of the
analysis of basic wages alone that establishescompany heads stated that the first
the substitutability between wages and profitprofit sharing agreements were signed when
sharing. the company was “buoyant”.
INSEE Studies no. 40, October 1999 7This finding needs to be qualified by company determinants depend on the business cycle
size. Total remuneration and basic wages were(1993 was a recession year).
not statistically different in small and
medium-sized establishments scheduled to
Profit sharing has a considerablebring in profit sharing (from 20 to 200
employees). Yet companies with over 200 positive effect on wages in the short run
employees paid lower total remuneration ( 5%
to -3%, other things being equal) while basicTotal employee remuneration is on the whole
wages differed little among the largest slightly higher where there is a profit sharing
companies (over 500 employees). Higher agreement, but this surplus is found to be
remuneration was found only in the very smalsubstantially larl ger when the first agreement
establishments (less than 20 employees). This was signed recently in 1991 or 1992 (see table 3
6 said, the sample is quite small and the relation and chart I). Total remuneration is 9.0%
is fairly insignificant for basic wages (only 140 higher when the profit sharing agreement was
employees were listed in this case). signed in 1992, 5.5% higher when it was signed
in 1991 and 3% to 4% higher when it was
A number of non exclusive assumptions can signed earlier. Recent agreements give rise to
therefore be put forward. It is not generally the higher remuneration regardless of company
most productive firms that adopt profit sharing. size and the basic wages are also higher: 4.8%
The determinants of profit sharing differ for agreements signed in 1992 and 3.5% for
structurally according to company size. It canthose signed in 1991 (see table 3 and chart II).
also be assumed that the determinants of
adoption vary according to the spread of the
mechanism. It was still very unevenly spread
by size in late 1992 and there was relatively
little profit sharing in very small companies.
6Lastly, the assumption could be made that these Agreements signed in 1991 may also have taken effect in 1992.
Table 3
The effect of profit sharing decreases with the age of the first agreement
Coefficient x 100 (1)
% of employees
Year of the first agreement
in the sample Total remuneration Basic wages
(c1) (c2)
Profit sharing in use in 1992
1986 or before 1.6 3.0** 1.8**
1987 4.3 4.0** 0.7
1988 3.3 2.8** 2.3**
1989 3.0 3.0** 0.8
1990 3.0 3.8** ( 0.04)
1991 2.8 5.5** 3.5**
1992 2.3 9.0** 4.8**
NR (2) 6.9 1.9** - 1.0**
F(1993 or 1994) (3) 1.1 (0.08) 1.6*
Abandon (4) 1.7 2.5** (0.7)
Adjusted R2 0.32 0.42
1. The two equations (c1 and c2 see appendix III) are estimated for the entire sample with size and sector dummy variables.
Coefficient ** is significant at 1%; * at 5%; ( ): not significant at 10%.
2. NR: profit sharing companies not registered in the official files.
3. F(1993 or 1994): non profit sharing companies in 1992 that signed an agreement in 1993 or 1994. The 1,640 employees the (1.5% of
sample) whose company stated that it was profit sharing in 1992 although the official source shows that the first agreement was signed
after 1992 are not included here. However they are considered as being on a profit sharing scheme.
4. Abandon: companies no longer practising profit sharing in 1992 that signed a agreement in 1989 or before.
Sources: INSEE survey on the structure of wages in 1992 and the DARES DRT profit sharing panel (1996).
8 INSEE Studies no. 40, October 1999In the short run, therefore, profit sharing and Profit sharing has less
wages (and hence probably productivity or atof a positive effect
least profitability) go hand in hand. Profit on total remuneration in the medium run
sharing looks to be complementary to wages
when basic wages are also high. These results If the assumption is made that profit sharing
moreover suggest that profit sharing is a source raises productivity and these gains are partly
of productivity, since total remuneration evenredistributed to the employees, higher total
after some years of practising profit sharing iremuneration should be observed the s longer the
higher than in non profit sharing companies orprofit sharing scheme has been in operation.
companies about to adopt profit sharing. Yet the surplus decreases with the age of the
scheme, with one exception for first
agreements signed in 1987.
One explanation for this could be that the
employee motivation effect and consequently
the productivity gains are higher in the first
year of profit sharing. Another non exclusive
explanation might be that companies adopt
profit sharing at the same time as organisationalChart I
changes that improve performance, albeit Effect of profit sharing
intermittently. In addition, the calculation ofon total remuneration 1992
the profit related bonus depends on theA By year of the first registered agreement
three year formula adopted: the bonus is in fact
less hit or miss in the first year when the
forecasting range is not very long. Companies
may choose to pay high bonuses in the first
year(s) and produce formulae to this effect.
This has an adverse effect
on basic wages
What are the findings for basic wages? If profit
sharing remains complementary to wages in the
B By size and year of the first agreement
Sources : INSEE survey on the structure of wages in 1992 and the DARES DRT profit sharing panel (1996).
INSEE Studies no. 40, October 1999 9medium run, the effect on basic wages shouldor not significantly different to the
be positive given the productivity assumptions non profit sharing companies.
based on the total remuneration findings.
However, the effect of profit sharing on basic
This medium run adverse effect wages decreases with the age of the agreement
and becomes significantly negative after fiveis found mainly in companies
years. In 1992, the companies that signed theirwith less than 200 employees
first agreement in 1988 paid 2.3% lower basic
wages than the non profit sharing companies. More generally, basic wages in small
companies seem to decrease with the age of the
Yet the agreements signed before or profit sharing to the extent of being
immediately after the 1986 edict seem to besignificantly lower than in non profit sharing
exceptions to this rule. The fact that very fecow mpanies after five years (other things being
SMEs adopted profit sharing this early on callsequal). The negative deviation is even
for an analysis of this effect by company size.significant as of the third year in the case of
For 1987 and the years before, the positive companies with 20 to 50 employees (see chart
effect is due only to the large “pioneering” II B). However, regardless of the year in which
companies. Those companies with less thanthe first agreement was signed, basic wages
200 employees show basic wages lower thanlower than those in non profit sharing
companies are not found in large companies
Chart II with more than 500 employees.
Effect of profit sharing on basic wages (1992)
These differences in the effect of profit sharingA By year of the first registered agreement
by company size and age of the agreements
signed probably partially explain the
complexity of the above static table drawn up
by collective agreement. The activity sectors
have extremely diverse productive structures.
For example, the proportion of employees in
companies with 200 or more employees varies
from 0% to 88% depending on the sectors
analysed (Barrat and Mabile, 1996). Given the
number of observations available in the sample, it
was not possible to make an in depth “dynamic”Sources : INSEE survey on the structure of wages in 1992 and the
DARES DRT profit sharing panel (1996). sector-by sector analysis of profit-sharing effects
B By size and year of fist agreement
Sources: INSEE survey on the structure of wages in 1992 and the DARES DRT profit sharing panel (1996).
10 INSEE Studies no. 40, October 1999