Base Monthly Salary Index Rises 0.3% in Q3 2025
Introduction: Moderate Wage Growth Under Close Watch
The third quarter of 2025 has brought fresh data on wage trends in France: the base monthly salary (SMB) index for all employees rose by 0.3% in companies with ten or more employees. While this increase is positive, it remains notably modest in a climate where inflation continues to chip away at household purchasing power.
Why is the SMB’s movement so closely watched? Because it serves as a barometer for the country’s economic momentum, business sentiment, and—most importantly—the ability of French households to keep up with rising prices. Expectations were high from both employees and economic observers, but reality has proven more nuanced.
In this article, we’ll break down the causes, consequences, and outlook for this change in base salary, drawing on official data, economic analysis, and key trends to watch in the coming months.
The Numbers: A Tepid Increase in the SMB
Q3 2025 confirms a trend seen in previous periods: the base monthly salary is rising at a slower pace, with an increase of just 0.3%. This figure applies to private-sector employees working in companies with ten or more people, and it excludes bonuses, overtime, and other variable pay elements. The SMB is therefore a “pure” indicator of wage trends, unaffected by one-off or exceptional factors.
For context, in Q2 2025, the SMB rose by 0.5% according to DARES, and over the past year, the increase reached 2.1%. This slowdown in the third quarter is striking, especially given that inflation continues to weigh on the French economy.
A Challenging Macroeconomic Backdrop
The 0.3% increase in the SMB must be viewed alongside inflation, which—even if slowing slightly—continues to put pressure on household budgets. According to INSEE and the Bank of France, annual consumer price inflation was still close to 1% by mid-2025, outpacing the SMB’s quarterly growth.
Sector data also reveals disparities: in Q2 2025, the SMB rose by 0.6% in industry, 0.4% in construction, and 0.5% in services. In Q3, the overall momentum weakened, confirming a trend toward stagnation.
Purchasing Power: Tepid Improvement, Disappointed Expectations
The most immediate impact of the SMB’s increase is on employees’ purchasing power. With a 0.3% rise for the quarter, base salary growth offers a slight improvement in real terms, but it’s not enough to fully offset rising prices.
Why Such Modest Growth?
Several factors explain this subdued wage movement:
A Sense of Stagnation Among Employees
For many French workers, this base salary increase falls short of expectations. Recent opinion polls show that nearly one in two employees feels their purchasing power has declined since the start of the year. Fixed expenses (housing, energy, food) continue to take up a growing share of household budgets, and limited wage growth is weighing on consumer spending.
Sector Analysis: Persistent Disparities
SMB growth isn’t uniform across the economy. Some sectors are holding up better than others in a generally sluggish environment.
Industry: Slight Lead, But Signs of Fatigue
While industry saw a 0.6% increase in Q2, Q3 marked a clear slowdown. This can be attributed to:
Services: Limited Growth, Pressure on Low Wages
In the service sector, SMB growth was capped at 0.5% in Q2 and slowed to 0.3% in Q3. Personal services, retail, and hospitality are particularly affected by:
Construction: Stagnation Despite Labor Shortages
Construction remains one of the sectors with the weakest SMB growth (0.4% in Q2, stagnation in Q3). Despite a shortage of skilled labor, companies in the sector struggle to pass higher costs onto customers, which keeps wage growth in check.
Outlook for Late 2025
Business leaders surveyed by the Bank of France expect median base salary growth of 2% nationwide over the next twelve months, a level unchanged for four straight quarters. This forecast reflects employers’ caution, as they anticipate a lackluster economic environment but no sharp downturn.
Key Factors to Watch
Social and Political Expectations
The public debate over purchasing power remains heated. Labor unions are calling for more substantial wage hikes, arguing that current increases don’t offset the rising cost of essentials. The government is focusing on targeted measures (such as purchasing power bonuses and support for low-wage earners) but faces budget constraints.
Impact on Businesses and Markets
The modest SMB increase in Q3 has direct implications for corporate strategy and investor sentiment.
Businesses: Balancing Competitiveness and Attractiveness
For companies, caution is the order of the day. While controlling payroll costs is crucial for competitiveness, attracting and retaining talent means they can’t skimp too much on pay raises. This tension is especially acute in high-demand sectors like tech and healthcare, where the war for talent is fierce.
Financial Markets: A Measured Response
On the stock market, the relative stagnation of base salaries is seen, in the short term, as a stabilizing factor for the profit margins of listed companies, especially in low value-added sectors. However, the main medium-term risk lies in a potential contraction of domestic consumption if purchasing power continues to erode.
Investors are keeping a close eye on upcoming corporate earnings, particularly in retail, automotive, and services—sectors that are highly sensitive to household income trends.
The Role of Institutions and Social Stakeholders
The release of the SMB index is closely monitored by all parties in the social dialogue: unions, employers’ associations, and public authorities.
Unions and Wage Demands
For labor unions, the 0.3% SMB increase in Q3 is insufficient. They point to the gap between wage growth and price increases, and are pushing for more ambitious measures:
Employers: Weighing Economic Constraints and Talent Attraction
Employer representatives stress the need to preserve the competitiveness of French companies in the face of global competition. They argue that SMB growth must remain in line with productivity and financial health, while acknowledging the importance of attracting young talent.
Government Role and Support Measures
The government, via the Ministry of Labor, reaffirms its commitment to supporting purchasing power through:
What’s Ahead for 2026? Scenarios and Recommendations
Looking toward 2026, several scenarios are emerging for the SMB and purchasing power:
Baseline Scenario: Continued Modest Growth
If economic growth remains moderate and inflation stays in check, the current trend—SMB rising about 2% year-over-year—could continue. This assumes international stability and no major shocks in raw materials or energy.
Optimistic Scenario: Economic Recovery and Faster Wage Growth
A stronger economic rebound, driven by innovation or exports, could allow companies to raise wages more significantly. This would require rapid productivity gains and renewed consumer confidence.
Pessimistic Scenario: Economic Downturn and Wage Stagnation
If the global economy slips or another crisis hits (health, geopolitical, etc.), companies might be forced to freeze wages or even cut some benefits. The challenge would then be to avoid a downward spiral in purchasing power and consumption.
Advice for Employees and Companies
For employees, it’s essential to stay informed about industry trends and to participate actively in collective bargaining. For companies, anticipating employee expectations and investing in training and upskilling will help maintain attractiveness—even in a period of limited wage growth.
Conclusion: A Key Indicator to Watch for Purchasing Power
The 0.3% increase in the base monthly salary index in Q3 2025, while offering a slight boost to purchasing power, falls short of meeting the current social and economic expectations. The persistent gap with inflation raises the risk of stagnation—or even erosion—of French households’ standard of living.
This moderate growth calls for heightened vigilance from public authorities, social partners, and businesses, who must balance caution, attractiveness, and adaptability in an uncertain environment. In the coming months, attention will focus on upcoming wage negotiations, the inflation trajectory, and the French economy’s ability to return to more inclusive growth.
The issue of purchasing power is far from resolved and will remain at the heart of economic and social debates through late 2025 and into 2026. Both employees and companies will need to adapt to this new reality, balancing caution, ambition, and the search for equilibrium.
---
❓ FAQ - Frequently Asked Questions
1. What is the Base Monthly Salary (SMB) index and who does it cover?
The SMB is an index that tracks changes in base monthly pay for private‑sector employees working in companies with ten or more employees in France. It excludes bonuses, overtime, and other variable pay elements, making it a focused measure of underlying wage trends. Because it reflects regular pay rather than one‑off payments, the SMB is closely watched as a barometer of economic momentum, business sentiment, and households’ ability to keep up with rising prices. Policymakers, employers, unions, and investors monitor the index to gauge wage dynamics and purchasing power pressures.
2. How much did the SMB increase in Q3 2025, and how does it compare to earlier periods?
In Q3 2025, the SMB rose by 0.3%. This marks a slowdown from Q2 2025, when it increased by 0.5% (DARES), and brings the year‑over‑year rise to 2.1% over the past twelve months. The Q3 figure confirms a moderating trend in base pay growth relative to earlier quarters, despite ongoing inflation pressures.
3. What does the SMB include and exclude, and why is it called a “pure” indicator?
The SMB measures changes in base monthly salaries. It excludes bonuses, overtime, and other variable or exceptional pay components. By focusing only on fixed base pay, the SMB offers a “pure” view of underlying wage trends that is not distorted by one‑off payments or temporary compensation schemes.
4. How does current wage growth relate to inflation and purchasing power?
Annual consumer price inflation was close to 1% by mid‑2025, while the SMB increased by 0.3% in Q3. Although the quarterly rise provides a slight boost to purchasing power, it is not sufficient to fully offset rising prices. The article highlights a risk of stagnation—or even erosion—of living standards if this gap persists, with fixed expenses like housing, energy, and food taking a larger share of household budgets.
5. Why is wage growth so modest in Q3 2025?
Several factors are cited: inflationary pressure still outpacing quarterly wage gains; a cautious corporate stance amid sluggish growth and global uncertainty; a stable unemployment rate that does not generate strong wage pressure; and the limited impact of the 2025 annual wage talks (NAO) in the spring, which were not sufficient to lift the index significantly.
6. Which sectors are showing the most and least momentum?
Disparities persist across sectors. In Q2 2025, the SMB rose by 0.6% in industry, 0.4% in construction, and 0.5% in services. Q3 saw a broad slowdown: services decelerated to 0.3%, industry showed signs of fatigue, and construction stagnated. Personal services, retail, and hospitality face thin margins, while industry contends with higher production costs and weaker international demand.
7. Why is construction stagnant despite labor shortages?
Construction experienced weak SMB growth (0.4% in Q2 and stagnation in Q3) because companies struggle to pass higher costs on to customers. Even with shortages of skilled labor, rising input costs and limited pricing power are constraining wage increases in the sector.
8. How are employees perceiving their purchasing power?
Opinion polls cited in the article indicate that nearly one in two employees feels their purchasing power has declined since the start of the year. Fixed expenses—housing, energy, and food—are consuming a growing share of budgets, and limited wage growth is weighing on consumer spending.
9. What is the outlook for base salary growth over the next 12 months?
Business leaders surveyed by the Bank of France expect median base salary growth of 2% nationwide over the coming twelve months. This forecast has remained unchanged for four consecutive quarters, reflecting employer caution in anticipation of a lackluster economic environment but no sharp downturn.
10. Which key factors should observers watch into late 2025?
The article highlights four: inflation (which could intensify wage pressures and shape upcoming bargaining rounds), the labor market (any hiring rebound or shortages could lift wages), monetary policy (ECB rate decisions affect borrowing costs and investment, influencing jobs and pay), and the international backdrop (growth in the Eurozone, US, and China affects demand and exporters’ capacity to raise wages).
11. What are the implications for businesses and financial markets?
For companies, the priority is balancing competitiveness (controlling payroll costs) with attractiveness (offering raises to retain talent), a tension that is acute in high‑demand fields like tech and healthcare. For markets, subdued base pay can stabilize margins in the short term, especially in low value‑added sectors. The medium‑term risk is a contraction in domestic consumption if purchasing power keeps eroding. Investors are watching upcoming earnings in retail, automotive, and services, which are sensitive to household incomes.
12. What are the possible 2026 scenarios and practical takeaways for employees and companies?
Three scenarios are outlined: baseline—continued modest SMB growth around 2% year‑over‑year if growth and inflation remain contained; optimistic—faster wage growth with an economic rebound driven by innovation or exports, supported by productivity gains and stronger confidence; pessimistic—downturn leading to wage freezes or benefit cuts. Practical advice: employees should stay informed about sector trends and participate in collective bargaining, while companies should anticipate expectations and invest in training and upskilling to sustain attractiveness despite limited wage growth.