Why the Bank of Spain believes raising the minimum wage will hurt job creation

The Bank of Spain has warned of the "collateral damage" the country's job market suffered the last time the minimum wage was raised, amid reports the Spanish government is considering revising this figure again and giving more rights to temporary workers.

Why the Bank of Spain believes raising the minimum wage will hurt job creation
Strawberry pickers in Spain: Photo: SAMUEL ARANDA / AFP

In its report published on Tuesday, the Bank of Spain wrote that after the increase in Spain’s Minimum Interprofessional Salary (SMI) in 2019, there was less growth in employment among those who earned the lowest wages. 

The last time the Spanish government increased the minimum wage to €900 in 2019, it caused the loss of between 98,000 and 180,000 jobs, El Banco de España wrote.  

The central bank of Spain explained that if this were to happen again, these negative consequences could be especially tough “on the employment of older people and will cause a reduction in hours worked and job creation for young people”. 

Spain’s top banking entity also indicated that after the rise in the mininum wage in January 2019, there was “a sharp drop in contracts with base wages less than or equal to €1,050”.

The report comes just after the Spanish government announced it was considering raising the minimum wage in 2021 by an amount which is yet to be confirmed, but which is expected to be between €50 and €250 more per month than the current base salary.

Spain’s current minimum wage is set at €1,108.3 gross per month. In reality, this equates to €950 a month, payable in 14 instalments to allow for the double monthly salary in July and December. 

This analysis by the Bank of Spain comes after the Organisation for Economic Co-operation and Development (OECD) criticised Pedro Sánchez’s government on May 27th after not having applied increases to the minimum wage “gradually” and for not having analysed the repercussions this has had on its employment.

“The process of setting the minimum wage could be modified with the creation of a permanent independent commission, in charge of evaluating its possible effects and preparing recommendations that allow a gradual modification of the minimum wage in line with the evolution of the conditions of the labor market and the productivity”, the OECD explained in its report to Spain.

The Bank of Spain’s report also indicated that the rise in the minimum wage would affect all age groups who are employed to a greater or lesser extent.

For those under 33 years of age there is “an important and significant increase in the probability of going from full time to part-time”. Among young people between 16 and 24 years old, the report stated that “the probability of being employed full time is reduced”. And with regards to the elderly, in most cases, they become unemployed.

According to the Bank of Spain, it’s the young people who will be the most negatively affected by this rise when it comes to finding work.

Unlike what happens with job loss, which affects older people, the most damaging effects are on those trying to find a job in the first place, especially those under 24 years of age.

The report estimated that there will be a reduction in job creation of 1.9 percent for those between 16 and 24 years old and of 1.2 percent for those between 16 and 64 years old.

The young are also the group most affected by unemployment. According to the latest government figures, this stands at around 39.9 percent and is the worst in the EU. 

The Spanish government is also currently trying to address the precariousness of the country’s job market by shortening the maximum length of temporary work contracts to six months so that temporary employees can access fixed positions sooner.


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Do I have to take most of my annual leave in August in Spain?

Many Spanish companies still expect their workers to take their holidays at specific times of the year, primarily in August, right in the height of summer when many hotels are fully booked. So what are your rights, are you obliged to take your vacation in one particular month?

Do I have to take most of my annual leave in August in Spain?

While it’s your right as an employee to be able to take holiday days, do you have to take them when your company wants you to take them, or are you able to choose and have more flexibility?

Despite August being one of the hottest months in Spain and the one month of the year when many official companies and offices shut up shop, not everyone necessarily wants to take their break at the same time as everyone else.

Taking your holidays in August means less availability in hotels, overcrowding and more expensive transport and accommodation. If you don’t have children who are off from school during the summer months, then you may wish to take your vacation days at another time of the year, when it’s less busy and cheaper.

To answer the question it’s important to know the details about what the law says about how paid time off is taken, requested, imposed, or granted.

What laws or regulations dictate the rules about paid holiday time?

There are three different sets of rules and regulations, which are responsible for regulating the laws on vacation time in Spain. 

Firstly, you need to look at the Spanish Workers’ Statute, which includes rights, duties and obligations applicable to all salaried workers in Spain.

Secondly, you need to be aware of the collective sector and/or company agreements, which may dictate the rules for a particular industry for example.

Thirdly, you need to look at the contract, which you signed with your employer when you started working for them. This sets out your individual circumstances and the rules you must abide by.   

Workers Statute

As a general rule, all employees are subject to the Workers’ Statute. Holidays are part of this and are the subject of article 38. These conditions can never be contradicted by individual companies and are set as a guaranteed minimum. 

The minimum number of holidays in Spain is 30 calendar days per year. This equals two and a half days per month worked, in the case of temporary contracts. The statute states that vacations must be taken between January 1st and December 31st in separate periods, but one of them must be for at least two weeks. They are always paid and cannot be exchanged for financial compensation.

The period when you can take them is set by a common agreement between the employer and the worker, in accordance with what is established in the collective agreements on annual vacation planning. If there is disagreement, the social jurisdiction is resorted to.

At a minimum, the company must offer vacation days at least two months before the beginning of the holiday period, so that the employee has time to organise and book.   

When the planned time to take vacations coincides with a temporary disability, pregnancy, or childbirth, you have the right to enjoy the vacations at another time, even after the calendar year is over.

Collective agreements on vacations  

Your sector’s collective agreements may also help to answer this question. These aim to improve upon the basic and general rights that are included in the Workers’ Statute. They seek to adapt the rules to each type of industry or company. They could, for example, set out extra vacation days, which are greater than the standard 30 calendar days. 

You will need to find out what your specific sector or company’s collective agreement is. There is a possibility that your sector or company has mandatory summer vacations for the month of August and in that case, you can choose vacation dates, but only within this month.

Your work contract 

Lastly, you will need to consult your individual contract which you signed with the company when you were hired.  As well as the minimum conditions set out in the Workers’ Statute, your contract sets out your particular agreement with your employer in terms of holiday duration, the work calendar and other details.

Therefore, you should state in your contract whether you have to take your holidays during August, or if you’re free to take them at other times of the year.

If after consulting these three sets of regulations and there are still in doubt or in disagreement with your company about vacations, such as having to take them during the month of August, you should consult a lawyer specialising in labor law. They should be able to give you an answer specific to your situation.  

Can I appeal or disagree and what are the consequences? 

To appeal or express disagreement with what is proposed by the company, there is a period of 20 business days from when the vacation schedule is sent out, after which time you don’t have the right to show that you disagree.  

Companies can proceed to disciplinary dismissals due to abandonment of the job if you decide to take vacations that have not been granted or agreed upon with your employer. To avoid this type of problem, always make sure you have a record in writing of your request for vacation time and subsequent approval by the company.