A common belief states labor cost is at the root of France’s waning competitiveness vis-a-vis Germany. Yet in terms of Unit Labor Cost (ULC), the gap has been narrowing in recent years. Between 2012 and 2017, the rise in German ULC reached +9% and +3.4% in France.
Policies explain most of the differential. In 2012, France offered companies a temporary tax credit. This helped reduce the rise in labor costs.