Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

The new Spanish minimum wage

Carlos Vacas-Soriano 16th July 2019

Raising wage floors is one way to reduce inequality and stimulate recovery in Europe. A big uplift in the Spanish minimum wage this year provides a test bed.

Spanish minimum wage

Carlos Vacas-Soriano

The Socialist-led Spanish government which emerged last summer approved by the end of 2018 a hike in the statutory minimum wage. This was agreed with the left-wing Podemos party, as part of an attempt to secure the parliamentary support needed for the passing of the proposed 2019 budget—although failure to do so issued in the April election.

The new minimum wage came into force on January 1st, rising from 14 monthly payments of €735.90 per year to €900 for those in full-time employment. This entailed an increase of 22 per cent—the highest in more than four decades in Spain and the most significant among EU countries in 2019.

Loss of purchasing power

The elevation was framed as a tool to counterbalance the loss of purchasing power among those employees who had suffered the worst consequences of the economic crisis. Although there had been prior increases in 2017 and 2018, the rise implemented in 2019 constituted a more determined policy approach.

The crisis had a strong and protracted impact on the Spanish labour market. Real wages had progressed much less among those employees with the lowest wages during the boom and after the crisis they were worst hit—especially the lowest quintile, whose wages continued to decline until at least 2016 (Figure 1).

Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content.


We will never send you spam and you can unsubscribe anytime.

Thank you!

Please check your inbox and click on the link in the confirmation email to complete your newsletter subscription.

.
Figure 1: Evolution of average real wages by wage quintiles (index: 2004=100)
Spanish minimum wage

Source: EU-SILC

Is the Spanish statutory minimum wage high? It does not seem so even at its new level (Table 1). Spain ranks eighth among the 22 EU countries which implement a statutory minimum wage and would occupy a more intermediate position if those countries which do not were included—since they have relatively high wage floors negotiated by social partners.

Table 1: Statutory minimum wage across EU countries (prorated over 12 monthly payments)
€ (2019) Percentage of the average wage (2017)
Luxembourg 2,071 42.7
Ireland 1,656 38.3
Netherlands 1,616 39.3
Belgium 1,594 39.8
Germany 1,557 42.5
France 1,521 49.9
UK 1,453 44.2
Spain 1,050 33.9
Slovenia 887 48.0
Malta 758 44.4
Portugal 700 43.5
Greece 684 32.8
Lithuania 555 43.4
Estonia 540 35.2
Poland 523 43.6
Slovakia 520 38.2
Czechia 519 35.4
Croatia 506 41.5
Hungary 464 40.2
Romania 446 43.6
Latvia 430 38.7
Bulgaria 286 43.4

Sources: Eurostat and OECD

Spain is at the bottom in terms of the proportion the minimum wage represents of the average wage. Apart from the fact that its minimum wage level is not high, this is explained by Spain being one of the EU countries where a smaller proportion of employees receive wages around the level of the statutory minimum wage, due to higher collectively-agreed minima in various sectors. Therefore, while the recent increase brings Spain more in line with other advanced EU economies, it does not directly affect large swaths of the workforce.

Estimated impact

The impact of the new minimum wage on the wages of the different types of Spanish workers can only be estimated for now using prospective analysis, as done here using the latest available pan-European wage microdata (the 2017 wave of the EU-SILC survey). These show that in 2016 only 7 per cent of employees earned wages falling between the statutory minimum wages of 2018 and 2019. Since Spain had almost 16 million employees, this means approximately 1.13 million would have been directly affected by the 2019 rise (the Independent Authority for Fiscal Responsibility, using recent national statistical sources, estimated that 8 per cent of employees, around 1,2 million, would be affected).

Employees who are female, without university education, temporary, younger, in smaller companies and/or in trade, accommodation and food and commercial services should have been relatively more affected. Nevertheless, the impact is not confined to direct beneficiaries: there will likely be spillover effects for those earning higher wages, since the new minimum wage is used as a reference point in collective bargaining.

The Spanish government argued the new minimum would improve the wages of those employees who needed it most and, since lower-paid workers have a higher propensity to consume, would strengthen aggregate demand and economic growth. Critics, including the Spanish Central Bank and the conservative People’s Party, opposed the measure, claiming it would result in job losses by increasing the wage bill for employers.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

According to classical economic theory, this may happen if the minimum is set too high, damaging precisely the less qualified and less productive workers it seeks to help. Nevertheless, the most recent empirical studies tend to agree that increases in minimum wages have not led to falls in overall employment, although some have identified small negative effects on the job prospects of certain workers such as the young or lower-skilled.

Two recent cases where significative negative employment effects have not emerged are the introduction of the statutory minimum wage in Germany in 2015 and the remarkable increases in the UK minimum wage in recent years. Nevertheless, the hike in the Spanish minimum wage is of a magnitude with few precedents across EU countries. It also differs from the German and UK examples in that in these two countries minimum wages are set in a predictable and transparent manner, with the full involvement of social partners and with a systematic monitoring of potential employment impacts by specific independent bodies.

Robust assessment

In principle, it would be difficult to imagine significant employment effects of the new Spanish minimum wage, since the proportion of workers directly affected is small. In January, some already attributed to it a fall in the number of affiliations to the social security system, but January is an historically bad month for employment and trends were similar to those of previous years, while the levels of affiliation have been growing in succeeding months.

Only when detailed individual data become available will a robust empirical assessment of the impact be possible, especially on the employment prospects for certain groups of lower-skilled workers. For the moment, Spanish low-paid workers are certainly feeling the benefit of the minimum-wage uplift.

For more detail, see the working paper ‘Spain’s minimum wage hike: context and possible effects’​

minimum-wage earners,gender divide
Carlos Vacas-Soriano

Carlos Vacas-Soriano is a research manager in the employment unit at Eurofound. He works on wage and income inequalities, minimum wages, low pay, temporary employment and employment quality.

Home ・ Politics ・ The new Spanish minimum wage

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

Gazprom,Putin,Nordstream,Putin,Schröder How the public loses out when politicians cash inKatharina Pistor
defence,europe,spending Ukraine and Europe’s defence spendingValerio Alfonso Bruno and Adriano Cozzolino
North Atlantic Treaty Organization,NATO,Ukraine The Ukraine war and NATO’s renewed credibilityPaul Rogers
transnational list,European constituency,European elections,European public sphere A European constituency for a European public sphereDomènec Ruiz Devesa
hydrogen,gas,LNG,REPowerEU EU hydrogen targets—a neo-colonial resource grabPascoe Sabido and Chloé Mikolajczak

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube