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.
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.
Comments
See Also
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.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.