Why Spain is heading towards the largest salary devaluation in almost 40 years

Sky-high inflation and a general unwillingness among Spanish workers to ask for salary raises look set to cause the biggest drop in purchasing power in Spain since 1984.

shopping in a bakery
The purchasing power of people in Spain is the lowest it's been in decades. Photo: photosforyou / Pixabay

If you have a job in Spain and you get the sense that your wages don’t go as far as they used to, then you’re right on the money.  

It began with rising electricity prices throughout 2021 and early 2022 (reaching historic highs of €544/MWh in March 2022).

Then the cost of gas and fuel began to rise, first as a consequence of rising electricity prices and then due to the war in Ukraine.

As a result of all of this, inflation skyrocketed and in March 2022, it surged to a 37-year high.

Certain food products have become more expensive than ever, causing even more strain on Spaniards’ wallets.

In the last year, consumers in Spain have faced the sharpest price increases of any major European economy, causing the price of food to rise steeply since the beginning of this year.

Inflation in Spain now hovers around 10 percent, whereas salary increases in 2022 have only been raised by 2.4 percent on average.  

Crucially, it’s not part of the Spanish work culture to ask for salary rises. A recent YouGov survey centred on European workers found only one in five Spanish workers plans to ask their bosses for a salary bump in 2022 – the lowest rate of the 18 countries featured – with employees in Spain arguing their unwillingness to ask for a raise was due to not believing they would be given one. 

And it’s worth noting that wages in Spain aren’t high compared to most of its neighbours. The average salary in Spain stood at €26,537 in 2020 , €9,528 (-26 percent) below the Eurozone average (€36,065), according to OECD data. 

All these points are contributing to the largest drop in purchasing power in Spain since 1984. 

READ ALSO: Will Spain soon no longer be the land of cheap alcohol?

Predictions from the Bank of Spain

According to estimates by the Bank of Spain inflation of could reach an average of 7.6 percent in 2022 compared to last year, while salaries are expected to grow just below four percent. The last time such a large difference was seen between the rise of the cost in products and salaries was back in 1984. Then, the Consumer Price Index (CPI) rose by 11.3 percent, while wages climbed by 7.8 percent, which shows a difference of 3.5 points.

This year, the forecasts indicate that the increase in the CPI will reach 9.8 percent, while the rise in salaries, as seen above will be just below 4 percent, which means a difference of at least 4.8 points.

The situation is especially worrying when the effects of the pandemic are taken into account. In 2021, Spaniards already lost a lot of purchasing power, since the difference between prices and salaries stood at 1.5 points last year.

This meant on average, salaries were worth around €400 less than the previous year. 

Can anything be done about it?

In March 2022, the Spanish workers’ unions already asked for an increase of at least five percent to make up for the rise in inflation.

However, the employers’ organisations the Spanish Confederation of Business Organizations (CEOE) and the Spanish Confederation of Small and Medium-sized Enterprises (CEPYME) rejected the petition, arguing that companies are still struggling to recover from the effects of the pandemic and cannot afford such as increase.

The International Monetary Fund (IMF) is also opposed to a sharp rise in wages, since it estimates that such a measure would only provoke an inflationary spiral that would aggravate the problem and prevent it from being controlled in the medium term. It estimates that if companies are forced to pay their workers more but earn the same, they will have to increase, in turn, the cost of what they sell, so a vicious circle would be entered that would make the situation worse.

Are Spaniards willing to ask for a pay rise?

Despite all this, a study by the international market research firm YouGov revealed just a month ago that Spanish workers are the least willing to ask for a pay rise out of a total of 18 developed countries surveyed.

Only around 20 percent of professionals in Spain think about asking for a pay rise and 74 percent say that they didn’t ask because they assumed there was no way their employer would agree.  

Among those who did consider asking for an increase, 37 percent said they wanted to ask for increases of between 2.1 and 5 percent, while 23.5 percent were going to ask their company for an increase of between 5.1 and 10 percent, and only 12 percent said they were going to ask for more than 10 percent.

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Can British people in Spain claim the UK’s winter fuel payment?

In the UK, there are various benefits available to help eligible people through the cold winter months – one of which is the winter fuel payment. But can Britons living in Spain claim this benefit to cover the cost of heating their Spanish homes?

Can British people in Spain claim the UK's winter fuel payment?

Energy costs are on the up in Spain, and with the winter fast approaching the added cost of paying for heating when the mercury drops can result in some very high bills.

Not all of Spain has freezing winters but there are often cold spells and many houses in the country tend to get even colder than it is outside.

READ MORE: Why are Spanish homes so cold?

The average winter temperature across Spain is 8C (1981 to 2010 average). That’s higher than the average in other European countries, but in Spain’s interior and mountainous areas it can be truly chilly from November to March.  

That means that overall, there’s a chance you’ll need to use a radiator or the central heating to keep your Spanish home warm.

So are some of the 400,000+ UK nationals who reside in Spain eligible for winter fuel financial support from the UK?

What is the UK’s winter fuel payment?

The UK’s winter fuel payment is a tax-free payment to help older people with heating costs during the cold winter months.

Those eligible must have been born before September 26th 1956, according to the UK government website.

How much people receive depends on their age and whether anyone else in the household is also eligible, but the amount is usually between £250 and £600.

I’m a UK national living in Spain. Can I claim the winter fuel payment?

The UK government states that those living abroad can benefit from the winter fuel payment if:

  • You moved to an eligible country before 1st January 2021
  • You were born before September 26th 1956
  • You have a genuine and sufficient link to the UK – this can include having lived or worked in the UK, and having family in the UK

While many EU nations are on the list of eligible countries, such as Austria, Germany, Sweden, and Italy, unfortunately Spain is not on the list.

This means that if you live in Spain, you will not be able to claim the winter fuel payment at all, even if you meet the age conditions.

Why isn’t Spain on the eligible list of countries?

The UK government services website nidirect states that “you cannot get the payment if you live in Cyprus, France, Gibraltar, Greece, Malta, Portugal or Spain because the average winter temperature is higher than the warmest region of the UK”.

This is despite the fact that some parts of Spain are a lot colder than the average UK winter temperatures. This includes cities, towns and villages near mountain ranges such as the Pyrenees or Sierra Nevada, or regions in the interior like Castilla-La Mancha, Aragón​​ and Castilla y León.

According to the British government, during winter the average temperature is between 2 and 7 C in the UK.

READ ALSO: Where are the coldest places in Spain?

Foreigners in Spain used to be able to claim this financial benefit, but it was scrapped in 2015 after many UK taxpayers were angry that UK winter fuel payments were going to help people that lived in countries that were generally warmer than the UK.

READ ALSO: Which UK benefits can Brits keep if they move to Spain?