By Olga Rissin| Product Manager, Freight Market Intelligence Consortium Europe & Russia | Chainalytics
What happened to transportation rates after the Macron Law implementation in France? Did it help avoid social dumping in the sector?
In 2015, France adopted the Macron Law which addresses many areas of the economy, including the transportation sector. The law, which came into effect in July 2016, practically prescribes aligning minimum wage for foreign-based drivers entering French territory with the French rules of social law. French minimum wage rule applies only if it exceeds the driver’s actual paid wages. The new regulations apply to all non-French transport companies sending employees to France under conditions described in Articles L. 1262-1 and L 1262-2 of the French Employment Act, specifically regarding cross-border transport if the customer is situated in or operating in France. It also applies in cases where a company transports to one of its own offices and when hired by a temporary employment company with the aim of transporting to a company operating in France (transit operations are not covered by the Macron Law).
In other words, the law should apply to all the loads going to France that are operated by foreign-based drivers with salaries lower than the French minimum wage but excluding loads crossing the French territory with final destinations outside of France.
Let’s explore the nature of the market dynamics for lanes going to France
The primary questions to be answered by this analysis include:
- How did rates change for lanes into France in July 2016 after the Macron Law came into effect?
- How did freight volumes change on affected lanes over the data period?
- How did the carrier mix change on lanes going into France?
For the analysis we used the data of Freight Market Intelligence Consortium in Europe, first looking at the rate changes into France after the Macron Law came into effect. Indeed, as depicted in the chart below, all rates into France show an increase after July 2016, when compared to the prior period, with a total increase of 0.33% by November 2016.
Since the law is intended to prevent social dumping and affect providers working with lower than French minimum wage drivers, we hypothesized that there may be a difference in carrier rates by origin. We expected there to be no change in rates out of Western Europe or the British Isles since minimum wages are close or surpass the French ones, but see a change in the rates out of Eastern Europe where minimum wages are lower. However, as shown in the chart below, there was only a very slight increase in rates (+0.5%) out of Eastern Europe and a much more dramatic change (+2.41%) in rates out of the UK.
Rates out of Western Europe showed no change between July and November 2016 and rates out of Southern Europe increased by 0.8%. Therefore, the rate increase into France from Eastern Europe appears to be lower or in line with other origins, which suggests that the change in minimum wage requirements caused by the Macron Law has had a limited effect on carriers working out of Eastern Europe. This could potentially be related to comparable actual wages.
Most of the freight into France comes from Western Europe. Freight Market Intelligence Consortium’s data shows the overall volume of freight into France grew by about 9% between July and November 2016, while the relative proportion changed only slightly.
Therefore, carriers going to France may have been experiencing tightening capacity in Q3 & Q4 of 2016 with the 9% growth in freight.
Freight volume trends by origin region show growth for all origins with the most intense dynamics out of the British Isles and Southern Europe. All freight volumes show a drop or slowdown in July 2016 when the Macron Law came into effect (likely caused by new carrier registration requirements), and then a swift recovery in the following months.
There have also been some interesting dynamics related to the number of carriers operating on lanes to France during 2016. All origin regions show a positive change in the number of distinct providers going to France. This is in sync with the previously portrayed growth in volumes of freight, with the exception of the British Isles: although lanes out of the British Isles showed growth of approximately 38% in freight volume (which was similar to Southern Europe), but this growth was not supported by an increase in the number of carriers. Instead, there was a sharp decrease of more than 18% in number of carriers working out of the British Isles.
The Carrier Utilization chart below supports this observation. As you can see, the monthly average number of loads per carrier grew on the lanes out of the British Isles by over 70%! Lanes out of Southern Europe show an increase of 17.4% in average number of loads per carrier, while in Western and Eastern Europe, utilization was more stable.
Conclusion
Our analysis has shown only a slight increase in rates on lanes going into France with most dramatic change occurring on lanes out of the British Isles (+2.41%). Interestingly enough, rates out of the Eastern European countries where minimum wages are typically lower than in France grew by only 0.5%.
Freight volumes into France also show the most substantial growth out of the British Isles and Southern Europe, with a more subtle increase in freight on lanes out of Western and Eastern Europe.
There was also a relative growth in the number of distinct providers going to France during 2016 with the exception of the number of carriers out of the British Isles. As a result, the amount of freight handled by an average carrier out of Eastern and Western Europe saw minimal change, indicating the relative balance of demand and supply and, subsequently, no substantial rate increase. Carriers out of Southern Europe were required to handle a lot more volume, but the number of carriers also increased, leading to the average rate increase of 0.8%. British Isles freight into France not only increased in volume, but there was also a decrease in the number of carriers handling it. Therefore, the rates to France from the British Isles increased by almost 2.5%.
The change in rates and number of carriers out of the British Isles is more likely related to macroeconomic issues such as Brexit and the resulting devaluation of the British Pound. The buying power of the Pound has decreased making it more expensive to import goods into the UK. As a result, fewer freight carriers are willing to go there. This dynamic likely stands behind the drop in the number of carriers out of the UK and the increase in volumes and rates out of the British Isles.
In summary, the Macron Law has had a limited effect, if any, on rates to France. Instead, lanes into France showed an increase in activity towards the end of 2016, which in some cases (i.e., shipments from the British Isles) was not supported by a growth in the number of carriers, leading to an overall rate increase.
Olga Rissin is a product manager for Chainalytics’ Pan-European Freight Market Intelligence Consortium across Europe and Russia.
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