SALARY INCREASES. CAN THEY HURT THE ECONOMY?
Wages in Spain have remained stagnant since 2008. The strong destruction of employment, after long years of economic recession, has opened a gap in the purchasing power of society, which, from the Government and social agents, are fighting to mend. It is not easy, taking into account that, between 2012 and 2014, the salary increase has not exceeded 0.6% per year. It represents derisory amounts, but it marks a trend and corresponds to favorable intentions to link salary growth to the improvement of the Spanish economy, which is expected to grow around 3% in the next financial year.
The destruction of jobs, the increase in unemployment, the lower cost of dismissal, a reviled labor market and wage stagnation are, for Spain, four scourges that delay its objectives in terms of human development. Hence, the conversations between employers, unions and the Government are always about how to solve the general state of the economy. Although in recent years the strategy undertaken has been to devalue the acquired rights to obtain competitiveness with respect to countries, normally "cheaper", it is time to change the sign of the drift, as jobs are built and a mass sustainable employment and disconnected from bubbles that facilitate the collapse of the economy. These labor monocultures have weighed down the quality of the growth model.
To understand how the social partners voluntarily commit to improving the economy and well-being of families, not by Government Decree, it is necessary to carefully observe the agreements reached regarding salary increases. Exercises, without a doubt, with very good intentions, but that, even today, are not reflected (or do so very slightly) in the pocket of the working class.
Since the bursting of the real estate bubble and the financial catastrophe, the main causes of the social and economic debacle, the different governments that have succeeded each other in Moncloa have been willing to mediate between the employers' association and the workers' unions to reach agreements in favor of both parties. On the one hand, for the working masses to improve their salary conditions and gain purchasing power; and, on the other, to establish increases linked to productivity and appropriate to business balance sheets, so that the threat of bankruptcy does not hover over companies. In this sense, since 2010 three major agreements have been signed which, despite not legally binding the companies, represent a clear example of the good harmony that is desired to be instituted in terms of Collective Bargaining:
I Agreement for the Entrepreneur and Collective Bargaining (AENC) of 2010 : after the failure obtained in 2009, when, through the mediation of the Zapatero Government, it was impossible to reach a kind of agreement on the matter, finally, the first great alliance was stipulated between social agents. In it, a salary increase of between 1 and 2% was established for the year 2011; and, between 1.5 and 2.5%, for 2012. However, in the last year it was not applied, due to the imminent signing of the next pact.
II Agreement for the Entrepreneur and Collective Bargaining (AENC) of 2012 : called "the wage containment agreement", it was the first great asset of the Rajoy Government, recently released in Moncloa. This agreement provided for salary increases of 0.5% for 2012; 0.6%, for 2013; and 0.7%, for 2014, if the GDP did not exceed the increase of 1%, which was what happened.
III Agreement for the Entrepreneur and Collective Bargaining (AENC) of 2015 : with favorable symptoms of the Spanish economy, the social agents met again last June, this time to sign a third agreement along these lines. The text establishes a salary increase of up to 1%, for 2015, and 1.5%, as a ceiling, for 2016. With all this, the latest analysis of agreements reflect that the salary increase remains at 0.97 %, a figure very close to the 1% recommended by the agreement.
Threats to economic growth
The containment still reigns in wages, despite the 3% that GDP is expected to increase in both 2015 and 2016. In this vein, the Director of the Bank of Spain, José María Linde, assures that salaries can be increased, as long as they "do not threaten employment" and for companies that show good results. “Not in a general way,” he explains. Faced with an unemployment rate that exceeds 22%, Linde also shows concern about the risk that links wage increases to the reduction in the unemployment rate. Something that could lead to fatal consequences for the objectives of reducing the unemployment rate set by the Government, taking into account that this is the main concern of Spaniards, according to data from the Center for Sociological Research (CIS) during the last years.
According to the CEOE's Quarterly Labor Cost Survey (ETCL), the unit cost per worker in the second quarter of 2015 stood at 0.4%, which is why it fell slightly compared to the first three months. Relative to these figures, employers, due to government tax incentives, pay less to hire workers and get a higher margin to repay in the form of wages. However, the ordinary labor cost barely grew by 0.2%.
The consequences of the systematic wage devaluation, whose purpose is to gain competitiveness abroad, are the constant conversations between employers and social agents to reach agreements that establish, definitively, a wage increase that is linked to European levels of productivity, much better than the Spanish ratios.
In this sense, the struggle is latent among the unions, which only have the right to organize general strikes that paralyze the economy; and the arbitrariness in setting wages established by companies to remunerate their workers, perceived by the former as unfair and equitable. In this line, achieving fluid relations between the two agents is essential, especially in times of crisis, when a sudden stop motivated by systematic strikes can slow down the sign of recovery. Hence, the Government is always willing to sit down to talk about Collective Bargaining.
Salary situation in Spain
The average salary in Spain reaches 22,653.55 euros, according to data from the National Institute of Statistics for 2013. The last agreement reached in terms of Collective Bargaining for the next three years will mean a salary increase of 16 euros per month, that is, about 200 euros per year.
Carrying out a review between the lowest paid jobs and those that reach a higher amount, a significant wage gap is observed. While the Spanish interprofessional minimum wage for 2015 is 756.70 euros (barely 10,000 euros per year) for low-skilled activities, there are sectors that pay up to 80,000 euros. This is the case of the Financial Department. By sectors, it is the best paid, according to the 2015 International Human Resources Trends Report prepared by Randstad Professionals.
The marketing and sales sector, likewise, pays its directors around 70,000 euros per year. Behind them, engineering companies stand out, which remunerate their managers with a range of between 47,000 and 63,000 euros on average per year.
The agency specialized in recruiting talent, in its Report, also points out very revealing figures. 53% of companies have improved their balance sheets in the last year, due, in large part, to the favorable prospects for economic recovery that is already beginning to be noticed. An increase in its activity and the fluidity with which business agreements are signed are once again making it easier for the gear of the economy to work again by itself. However, there are still many companies that, according to this report, do not observe any recovery in their activity. Specifically, one in four (24%) think that their situation has worsened in recent months.
Even with everything, the results of Randstad do estimate the number of companies that have improved the salary conditions of their workers at 27%, compared to 64% that have maintained them and 7% that have degraded them.
Spain demands effective action to improve the quality of work and to establish a favorable economic situation. This work involves everyone (Government, employers and unions). Only a great pact for labor equality that determines salary increases when business productivity improves can guarantee the recovery of the purchasing power left behind in the way of the crisis and allow families to restore their pre-crisis living standards.
These commitments affect everyone. However, due to the government's “non-interference” policy in business drift, it leaves the voluntary fixing of real increases to the employers' association and business confederation. All this, in a legally non-binding way that can exasperate the spirits of the most disadvantaged classes, at the base of the salary pyramid. Reversing the situation and achieving an equitable distribution of wealth continues to be a pending issue.