Spain Approves An Outstanding Increase Of 22% Of The Minimum Wage To Fight Against Job Insecurity
Spaniards have something to celebrate in New Year's Eve, on December 21th the Council of Ministers approved the largest increase in the minimum wage since 1977, rising salaries up to €900 ($1,030) per month, representing an increase of 22%. The measure was approved through a royal decree (a special power of the executive to pass legislation without having to go through the validation of the Congress), so that it could enter into force from January 1st of next year avoiding the uncertainty about the ability of the Government, which is in minority, to carry out its budget plan for 2019.
This significant increase responds to the budget agreement reached between the socialist Government of Pedro Sanchez and the left anti-austerity party Podemos, which for years has called for an increase in wages. The decree establishes a minimum salary of €12,600 per year ($14,414) and it will apply to both permanent and temporary workers as well as domestic employees. According to UGT, one of the Spanish main unions, it will benefit 2.6 million people, this is 15% of the total wage earners.
“The rise in the minimum wage is a decisive factor for the creation of employment and economic recovery to be translated into a progressive real reduction of poverty and of wage inequality,” explains the royal decree in the preamble, which also indicates that the increase will “serve to improve the general conditions of the economy” and “promote a more dynamic general salary growth.”
It should also be noted that more than half of the benefited will be women (56.7%), whose salaries remain lower since they continue to occupy most of the temporary and part-time work in Spain (74% according to the Spanish National Institute of Statistics).
Therefore, the new minimum wage will contribute to reducing the gender pay gap, situated at 14.2% according to Eurostat.
In parallel, the Government has approved a salary raise to the public employees of 2.25% with the possibility of increasing an additional 0.25% depending on the GDP and another 0.25% depending on each administration (state, regional or local).
The Minister of Public Function, Meritxel Batet, has indicated that this measure will affect 2.5 million people that make up the public sector. "Public employees have endured freezes and salary reductions due to the economic crisis, it seems logical that in the new economic context we can advance in the increase of private and public salaries," she said.
This increase in wages has been slightly taking place throughout Europe since the Member States started to recover from the economic crisis of 2008. However, Spain's increase is far higher than other minimum wage increases in the EU in recent years, and it is justified by President Pedro Sánchez because "a rich country cannot have poor workers.”
However, there is a strong rejection of this measure from part of the opposition, especially from the conservative-right Popular Party. Pablo Casado, the president of the Popular Party, considers the measure to be irresponsible and believes that the rise of the minimum wage will trigger the rest of the salaries by 20%, for which Spanish economy is not prepared yet. In addition, the opponents to the increase claim that setting minimum wages too high can lead to rises in unemployment.
Nadia Calviño, the Spanish Minister of Economy and Business, was asked about this same question in an interview with the American TV channel CNBC last October. The presenter pointed out the fact that unemployment in Spain was falling, although it was still around 15% (14,5% according to the Spanish National Institute of Statistics), and asked Calviño if raising the minimum wage would be counterproductive in order to continue this trend.
Calviño explained then that there has been an important “decrease in real wages” and “there is a serious problem of precariousness in the labor market” in Spain that needs to be tackled.
“Lots of people are actually poor workers, they cannot meet the end of the month and they cannot pay their bills,” said the Minister, “but our expectation is that there should not be a negative impact on the labor market in the short run, in particular, thanks to the growth rate that we are having right now,” she concluded.
In fact, according to Eurostat, Spain is one of the countries with the highest involuntary part-time employment in the EU (62%), only surpassed by Greece, Cyprus, and Italy. Also, regarding temporary contracts, Spain stands at 26.3%, well above the European average (14.2%), which means that one in every four workers does not have a fixed-term contract. In addition, according to CCOO, the main union in Spain, 91% of the labor contracts signed in the first half of 2018 have been temporary, and 38% of them had a duration of less than one month.
In Spain, as in other EU countries, there have been important reforms to make the labor market more flexible after the economic crisis of 2008. As a result, there has been an increasing precariousness, to the point that according to the OECD, 14.8% of Spanish households that have at least an active worker, live below the poverty line.
The royal decree published in the Spanish Official State Gazette refers to the interpretation of the European Committee of Social Rights, which establish that the threshold to guarantee the right to an "equitable" and "sufficient" remuneration is 60% of the average salary of the workers. According to the text, raising the minimum wage up to €900 per month will bring Spain closer to fulfilling this recommendation.
Currently, Spain is classified in the second EU group regarding minimum wage, which goes from €500 ($573) to €1000 ($1,146) per month, together with Estonia, Portugal, Greece, Malta, and Slovenia. The Iberian Peninsula is still far from the top EU group, where the minimum wage goes from €1,464 ($1,678) to €1,999 ($2,292) per month, to which the United Kingdom, Germany, France, Belgium, the Netherlands, Ireland and Luxembourg belong. However, from next January 1st, Spanish workers will be one step closer to these standards and one step further from job insecurity and the phenomenon of 'poor workers'.
Spaniards have something to celebrate in New Year's Eve, on December 21th the Council of Ministers approved the largest increase in the minimum wage since 1977, rising salaries up to €900 ($1,030) per month, representing an increase of 22%. The measure was approved through a royal decree (a special power of the executive to pass legislation without having to go through the validation of the Congress), so that it could enter into force from January 1st of next year avoiding the uncertainty about the ability of the Government, which is in minority, to carry out its budget plan for 2019.
This significant increase responds to the budget agreement reached between the socialist Government of Pedro Sanchez and the left anti-austerity party Podemos, which for years has called for an increase in wages. The decree establishes a minimum salary of €12,600 per year ($14,414) and it will apply to both permanent and temporary workers as well as domestic employees. According to UGT, one of the Spanish main unions, it will benefit 2.6 million people, this is 15% of the total wage earners.
“The rise in the minimum wage is a decisive factor for the creation of employment and economic recovery to be translated into a progressive real reduction of poverty and of wage inequality,” explains the royal decree in the preamble, which also indicates that the increase will “serve to improve the general conditions of the economy” and “promote a more dynamic general salary growth.”
It should also be noted that more than half of the benefited will be women (56.7%), whose salaries remain lower since they continue to occupy most of the temporary and part-time work in Spain (74% according to the Spanish National Institute of Statistics).
Therefore, the new minimum wage will contribute to reducing the gender pay gap, situated at 14.2% according to Eurostat.
In parallel, the Government has approved a salary raise to the public employees of 2.25% with the possibility of increasing an additional 0.25% depending on the GDP and another 0.25% depending on each administration (state, regional or local).
The Minister of Public Function, Meritxel Batet, has indicated that this measure will affect 2.5 million people that make up the public sector. "Public employees have endured freezes and salary reductions due to the economic crisis, it seems logical that in the new economic context we can advance in the increase of private and public salaries," she said.
This increase in wages has been slightly taking place throughout Europe since the Member States started to recover from the economic crisis of 2008. However, Spain's increase is far higher than other minimum wage increases in the EU in recent years, and it is justified by President Pedro Sánchez because "a rich country cannot have poor workers.”
However, there is a strong rejection of this measure from part of the opposition, especially from the conservative-right Popular Party. Pablo Casado, the president of the Popular Party, considers the measure to be irresponsible and believes that the rise of the minimum wage will trigger the rest of the salaries by 20%, for which Spanish economy is not prepared yet. In addition, the opponents to the increase claim that setting minimum wages too high can lead to rises in unemployment.
Nadia Calviño, the Spanish Minister of Economy and Business, was asked about this same question in an interview with the American TV channel CNBC last October. The presenter pointed out the fact that unemployment in Spain was falling, although it was still around 15% (14,5% according to the Spanish National Institute of Statistics), and asked Calviño if raising the minimum wage would be counterproductive in order to continue this trend.
Calviño explained then that there has been an important “decrease in real wages” and “there is a serious problem of precariousness in the labor market” in Spain that needs to be tackled.
“Lots of people are actually poor workers, they cannot meet the end of the month and they cannot pay their bills,” said the Minister, “but our expectation is that there should not be a negative impact on the labor market in the short run, in particular, thanks to the growth rate that we are having right now,” she concluded.
In fact, according to Eurostat, Spain is one of the countries with the highest involuntary part-time employment in the EU (62%), only surpassed by Greece, Cyprus, and Italy. Also, regarding temporary contracts, Spain stands at 26.3%, well above the European average (14.2%), which means that one in every four workers does not have a fixed-term contract. In addition, according to CCOO, the main union in Spain, 91% of the labor contracts signed in the first half of 2018 have been temporary, and 38% of them had a duration of less than one month.
In Spain, as in other EU countries, there have been important reforms to make the labor market more flexible after the economic crisis of 2008. As a result, there has been an increasing precariousness, to the point that according to the OECD, 14.8% of Spanish households that have at least an active worker, live below the poverty line.
The royal decree published in the Spanish Official State Gazette refers to the interpretation of the European Committee of Social Rights, which establish that the threshold to guarantee the right to an "equitable" and "sufficient" remuneration is 60% of the average salary of the workers. According to the text, raising the minimum wage up to €900 per month will bring Spain closer to fulfilling this recommendation.
Currently, Spain is classified in the second EU group regarding minimum wage, which goes from €500 ($573) to €1000 ($1,146) per month, together with Estonia, Portugal, Greece, Malta, and Slovenia. The Iberian Peninsula is still far from the top EU group, where the minimum wage goes from €1,464 ($1,678) to €1,999 ($2,292) per month, to which the United Kingdom, Germany, France, Belgium, the Netherlands, Ireland and Luxembourg belong. However, from next January 1st, Spanish workers will be one step closer to these standards and one step further from job insecurity and the phenomenon of 'poor workers'.
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