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Spain is about to raise the minimum wage by a whopping 22 percent

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Spain is about to raise the minimum wage by a whopping 22 percent
Photo: AFP
09:38 CET+01:00
Spanish Prime Minister Pedro Sanchez said Wednesday his cabinet would approve next week a 22 percent increase in the monthly minimum wage to €1,050 ($1,192) in 2019.

The increase, "the biggest since 1977", will be approved at a cabinet meeting to be held in Barcelona on December 21st, he told parliament.

 "A rich country can't have poor workers," said Sanchez, who is widely expected to call an early general election next year.

The measure was part of his minority Socialist government's draft 2019 budget which he is struggling to pass in parliament so it will now be approved by decree.

The announcement comes after French President Emmanuel Macron unveiled Monday a 100-euro ($113) per month increase in the minimum wage from next year in a major concession to "yellow vest" protests which have roiled the country.   

After years of austerity policies imposed to cope with the fallout from the 2008 financial crisis, governments are under increasing pressure to ease the purse strings, especially for the lower paid.

Sanchez's Socialists control just 84 seats in the 350-seat parliament, the smallest number for a government since the country returned to democracy following dictator Francisco Franco's death in 1975.   

He negotiated the draft 2019 budget with far-left party Podemos, which controls 67 seats, but would still need the support of Catalan separatist parties to pass the spending plan and they have steadfastly refused.   

The government estimated the minimum wage hike will cost the state €340 million per year.

Employers groups and the conservative opposition parties, the Popular Party (PP) and Ciudadanos, oppose the wage hike, saying it will hurt job creation.   

PP leader Pablo Casado has said the 2019 budget, which also includes tax  hikes, is "economically suicidal".

The decision to raise the minimum wage by such an amount has been slammed by the chairman of Banco España who claims it will cause thousands of young people to lose their jobs. 

Pablo Hernandez de Cos told journalists last month 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.”

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

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.

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 percent that year).

 
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