The OECD warns of the loss of purchasing power of wages in Spain

He argues that the rise in the SMI has not caused a substantial problem for employment and foresees more moderate increases in the future

9 Jul. () –

The context of slowing inflation and solid labour markets is allowing real wages to rise in most countries of the Organisation for Economic Co-operation and Development (OECD), which warns that Spain is among those members where wages “have fallen the most since the start of the pandemic”.

“Despite positive trends in the labour market, Spain is among the OECD countries where real wages have fallen the most since the start of the pandemic,” summarises the think tank of advanced economies in its report ‘Employment Outlook 2024’.

In this regard, the Paris-based organization recalls that, although nominal wages in Spain have increased above inflation in 2023 and early 2024, real wages, after adjusting for inflation, were still 2.5% lower in the first quarter of 2024 compared to the fourth quarter of 2019.

By contrast, the OECD adds, nearly half of the 38 member countries, including neighbouring Portugal and France, have successfully returned to pre-crisis real wage levels or exceeded them.

Regarding this different evolution, in the Spanish case it warns that the country is facing higher year-on-year inflation compared to the Eurozone, with a reading of 3.8% and 2.6%, respectively, in May, “which represents a barrier to the growth of real wages.”

MINIMUM SALARY.

On the other hand, unlike what has happened in the case of wages in general, the OECD highlights that the minimum wage in Spain has grown above inflation.

Specifically, the cumulative increase in the minimum wage in Spain since 2019 after the successive increases undertaken is 26% in nominal terms since before the pandemic.

However, due to inflation, this translates into a real increase of 6.5%, slightly below the OECD median.

In this regard, in May 2024, the real minimum wage was 12.8% higher than in May 2019 on average in the 30 OECD countries that have a legal minimum wage at the national level, while the median increase was 8.3%.

In its analysis, the OECD recalls that the Spanish Government aimed to increase the minimum wage to 60% of the average wage, a milestone achieved in 2023, so it anticipates that “future increases in the minimum wage are likely to be more moderate.”

On the other hand, the international organization considers that the increase in the minimum wage in Spain “has not posed a significant challenge to employment growth”, which has been solid throughout the period.