Spain announces 5.5% hike in minimum wage as ‘tool’ against inequality

Spanish Minister of Labor Yolanda Diaz arrives to Moncloa Presidential Palace in Madrid, Spain, 14 January 2020, to attend the Government's first Cabinet Meeting. [Emilio Naranjo/EPA/EFE]

Spain’s new government on Wednesday (22 January) announced a 5.5% rise in the minimum wage retroactive to 1 January, the third major economic initiative the left-wing coalition has announced since taking office this month.

The government’s move is part of a plan to boost the net minimum wage to 60% of the average monthly pay packet of €1,944 by the end of its four-year term.

“I want to announce that we are a strong government, that we are heeding the mandate of a social majority that wants us to move forward,” Labour Minister Yolanda Díaz said after meeting with business and union representatives.

She said the rise in minimum wage to €1,108 per month was a “small tool” for tackling inequality. Spain’s Labour Ministry said it would affect more than 2 million people.

The new government has also announced rises in pensions and civil servant salaries.

Prime Minister Pedro Sánchez decreed a 22% increase in the minimum wage in late 2018. The biggest jump since 1977, it catapulted Spain from having one of Europe’s lowest minimum wages, relative to the average wage, to one of the highest.

Business leaders were unhappy with Wednesday’s announcement while unions welcomed it.

BBVA bank said minimum wage hikes so far had a “limited” beneficial impact while slowing job creation. It said increases had cost a potential 45,000 jobs in Spain’s least developed regions such as Andalusia and the Canary Islands.

The government and unions maintained that wage hikes have not hurt employment.

“The minimum wage has not destroyed employment in Spain. And the rise in salaries is going to contribute to creating more jobs in Spain,” said CCOO union chief Unai Sordo.

After the press conference, Labour Minister Díaz said she had long been working “secretively” with the social partners. She said all parties had “given up something” but “we are all very happy” with the agreement.

The government is also expected to deliver on a promise to roll back parts of a 2012 labour reform that made it easier for companies to fire workers and drove down wages.

Díaz said the government planned to roll back the reform in two phases, and the first would be done “very quickly”.

Some of the government’s major priorities in rolling back the reform include securing a shift back towards sector-wide collective bargaining agreements and away from individual company deals, and preventing companies from firing employees because of illness-related absence for a certain period of time.

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