Minimum wage rise will cost 150,000 jobs: Bank of Spain

The head of Spain’s Central Bank slammed the country’s recent 22 percent minimum wage increase on Thursday, claiming thousands of young people will lose their jobs as a result.

Minimum wage rise will cost 150,000 jobs: Bank of Spain
Photos: AFP

Banco de España chairman Pablo Hernandez de Cos has openly criticised the ruling socialist party’s decision to put Spain’s minimum wage up from €735 to €900. 

The seasoned economist told journalists that the salary rise would slash 0.8 percent of jobs in Spain and “have the opposite effect to that intended of hindering those we want to help most, young people.”

Of the 19.5 million people registered as employed in Spain, that percentage amounts to 150,000 jobs.

“A small minimum wage increase has little effect, but we haven’t had to deal with such big wage rises before, let alone 22.3 percent,” Hernandez de Cos explained in his first parliamentary press conference since being appointed head of Spain’s Central Bank last summer.

Previous minimum wage increases in Spain were of 8 percent in 2017 and 4 percent in 2018, but Hernandez de Cos claims that employer’s obligation to pay considerably more will make them fire their least productive workers.

“Empirical evidence on the consequences of SMI (salario mínimo interprofesional) rises are varied, but it is usually regarded as having a negative effect on peripheral jobs” and has “the most significant impact on young people and older unskilled workers”, he added.

According to the economist, the most effective way of protecting these vulnerable workers is by tackling the job market’s excessive temporary work demand as well as high turnovers and shift work exploitation.

The Spanish governement’s €900 SMI rise will add up to €12,600 a year for the country’s minimum wagers, as it’s traditional in Spain for workers to receive two bonus salaries in the summer and at Christmas, taking the total up to 14 payrolls.

Unemployment fell below 15 percent for the first time in 10 years during the 2018 summer period, Spain’s public data institute INE reported in late October (six months earlier than Spanish megabank BBVA predicted).

Youth unemployment remains high, 28 percent, but is still far less alarming that during the height of the financial crisis, when it surpassed 55 percent in 2013 (average joblessness in Spain came close to 27 pecent that year).

SEE ALSO: Jobless Spaniards turn noses up 12,000 strawberry picking jobs 



Unemployment in Spain hits four million for first time since 2016

The number of people in Spain registered as unemployed surpassed four million for the first time in five years in February, government figures showed Tuesday, as pandemic restrictions hit the country's tourism-dependent economy.

Unemployment in Spain hits four million for first time since 2016
Photo: Josep Lago/AFP

Jobless claims rose by nearly 45,000 last month over last month to hit 4,008,789, the labour ministry said, the fifth consecutive monthly increase.

The rise is due to the impact of “severe restrictions imposed to combat the third wave of the pandemic,” the ministry said in a statement.

The last time the number of jobless in Spain rose above four million was in April 2016.

Spain’s regional governments, which are responsible for health, have imposed various measures to try to curb the spread of the coronavirus, including shutting down bars and restaurants and nightly curfews which have hit the hospitality sector hard.

A broader, quarterly household survey by the national statistics institute INE provides the official unemployment rate, which hit 3.7 million or 16.1 percent at the end of December.

Both the labour ministry and the INE figures do not include the roughly 755,000 people benefitting from a government coronavirus furlough scheme as of the end of last year.

The Spanish government says it has spent €40 billion ($48 billion) since the start of the pandemic to finance the furlough scheme and help the self-employed.

Spain’s economy contracted by 11 percent in 2020, one of the worst performers in the eurozone, with its key tourism sector battered by the