The increases in the interprofessional minimum wage that the Pedro Sánchez Government has approved will hinder the exit from the economic crisis that has caused the coronavirus pandemic. Most experts report that the minimum wage increase It will be counterproductive, especially for those people who receive lower salaries.
María Jesús Fernández, senior economist at the study service of the Fundación de Cajas de Ahorro (Funcas), explains that “in a situation like this is when there is the greatest danger of a negative effect” of the rise in the SMI. “When the tide goes out, you can see who is without a swimsuit,” he says. “When we come out of this crisis so hard, that the SMI is higher can harm job creation,” warns this expert. He explains that for a company that is starting to function it is not the same to pay a salary of 850 euros or 1,000 euros. However, it clarifies that the impact of raising the SMI is less in good times and that, instead, in times of crisis it shows more.
Pedro Sánchez’s government has increased the minimum wage significantly since he arrived in La Moncloa, a period in which unemployment has also increased significantly. The SMI amounted to 735.9 euros in 2018 when there was a motion of censure to Mariano Rajoy who appointed the current leader of the Executive, escalated to 900 euros in 2019 (shooting up 22.3%) without the agreement of the businessmen, and advanced to 950 euros in 2020 in 14 payments, 5.5% more, in this case with the reluctant endorsement of the CEOE. We must not forget that the minimum salary was 570 euros in 2007, 66% lower.
For his part, Daniel Fernández Kranz, professor at IE Business School, in a January 2019 article published in a Funcas document noted that “there is evidence that excessive increases in the minimum wage can adversely affect employment of those groups that it aims to help, for example, young people. “Furthermore, it is not clear that this is the most effective tool to combat the growing income inequality of families, since there is no clear relationship between the level of wages and the poverty of families. For all of the above, the most recommended would be to propose more gradual climbs of the minimum wage to study their impact on the employment of the affected groups. Also, it would be advisable to establish differences in the level of the SMI between groups of workers, in the German style, in which the level of the SMI is lower for young people with little work experience, “he said.
The question is not whether the authorities or companies want to raise the lowest wages, but whether it is economically feasible, for the added value generated by those jobs. A study by the Institute of Economic Studies, IEE, prepared by its former president José Luis Feito in 2017When Rajoy was still in office, he warned that a rise in the SMI was “harmful to part of the most vulnerable workers: those with the lowest incomes and those most likely to lose their jobs and remain unemployed.” He pointed out that, as “happened with other sudden increases in the minimum wage at the beginning of the political transition and in Zapatero’s legislatures (2004-2011)”, this rise in the minimum wage cost It would increase “the weight of temporary hiring, reduce the duration of the average work day and slow down the growth of full-time employment, increase the structural unemployment of young people and low-skilled workers and stimulate the underground economy.”
For his part, BBVA Research He calculated earlier this year that the rise in the SMI prevented 45,000 jobs from being created in 2019 in the Spanish economy, something that could undoubtedly worsen in 2020 because the country will be facing and trying to get out of the most intense recession since the Civil War.
The links between the 2012 labor reform and the SMI
José Antonio Herce, managing partner of Afi, relates that «during all these years, even before the unfortunate circumstance of Covid-19, the coalition government and the socialist government have been taking measures of very important increases in the minimum wage before, precisely using the reasoning that they were doing to compensate the workers for the disproportionate easing, in the opinion of those who have adopted these measures, which took place in 2012 ”. This is, in his opinion, a compelling reason why the labor reform should not be reversed as proposed by the Government.
For his part, Gisela Turazzini, CEO of Blackbird Broker, believes that the increase in the professional minimum wage “is a necessary measure since we cannot claim to have a country with a value-added economy, with precarious wages”. In his opinion, “minimum wages should always be reviewed and companies make sure that labor productivity is in line with the expectations of workers.” “With a flexible labor market, it is not a problem to leave the professional minimum wage at the levels proposed by the Government,” says Turazzini, who believes, despite the fact that “If Spain totally repeals the 2012 labor reform, we will return to worse shoemaking”.