Economy proposes to employers and unions that wages rise by at least 3.5% in 2022

Economy proposes to employers and unions that wages rise by at least 3.5% in 2022

First, it was the Second Vice President and Minister of Labor, Yolanda Díaz, at the beginning of the political course, who showed her "explicit support for union mobilizations against the bosses" to try to reactivate negotiations on wage increases. Now, from the Ministry of Economic Affairs of the first vice president, Nadia Calviño, they are giving another push to the rent pact (or distribution of the damage of inflation between companies and workers) that the Government has been promoting since the beginning of the Russian invasion of Ukraine , and they assure that "the best reference" to resume it "is where the social agents left off in the AENC (Collective Bargaining Agreement) negotiation that was broken in May."

The majority unions, UGT and CCOO, and the representatives of the companies they got up from the table in the spring with a proposal that included an increase in wages, agreed at the beginning, of 3.5% in 2022, 2.5% in 2023 and 2% in 2024, plus a saving clause to compensate for the loss of purchasing power of workers due to runaway inflation.

"A differential between inflation at the end of each year with the agreed increase, which would be recovered twice: a percentage at the end of each year, and another percentage at the end of the cycle [en 2024]", Union sources recall.

Without explicitly supporting the safeguard clauses, in the Ministry of Economic Affairs they consider that "it is very important to have a multi-year framework because that allows for stability and more flexibility in the negotiation".

"Those references that they were handling initially were useful, and then we have to try to find formulas so that workers can have an element of protection or contribution depending on how the economy is going," he continues from the Ministry of Calviño, from where They add that this "protection element" should be "flexible and allow it to be done depending on the situation and the evolution of the companies."

The latest union proposal was structured in such a way that, assuming an example of average inflation at 8% this year, the 3.5% increase agreed in 2022 would be adjusted in two parts: half of the 4.5 percentage points remaining at the end of the year and at the end of 2024 the other half. This "scheme" was carried out in April, with the general CPI (Consumer Price Index) at 8.4%, compared to the same month of 2021, after having climbed to 9.8% in March.

Since then, inflation reached a new ceiling of 10.8% year-on-year in July, and moderated to 10.4% in August, according to advance data confirmed by the INE (National Institute of Statistics) on Tuesday, September 13. Meanwhile, last month, and according to this same forecast, the core CPI, which does not include energy or unprocessed food, soared to 6.4%. Before a new negotiation, the context has hardened and the new proposal of the unions could start from a more demanding framework.

The maximum of the most structural inflation in August —the core inflation, which does not take into account the elements whose prices are considered more volatile and which may drop rapidly in the coming months (gas, fuels, electricity...) if the uncertainty for the war—gives a reference to the dimension of the crisis and its strong impact on the purchasing power of families.

On Friday, the Organization for Economic Cooperation and Development (OECD) placed Spain as one of the countries with the greatest drop in "real wages", discounting the effect of inflation. According to his calculation, the growth of salaries taking into account prices fell "sharply in 2021, and is expected to continue to decline 4.4% in 2022”. This fall doubles that of the average of the so-called "club of rich countries" and is only behind Greece, with a contraction of 6.9%.

From the Ministry of Economic Affairs, before launching the recommendations collected by, Nadia Calviño herself had expressed that in order to propose salary increases "underlying inflation is taken into account, but the maximum is moderation".

The average remuneration of workers in Spain hardly accumulates a rise of 2.6% in 2022, according to data from 'Sales, employment and wages in large companies and SMEs' from the Tax Agency, at the end of the second quarter. In 2021, the improvement was 3.2%, according to the same statistic.

If the salary increases agreed in the agreements this year are studied, the improvement also remains at 2.6% until August, according to the latest data published by the Ministry of Labor. In this context, economists from practically the entire ideological spectrum are clamoring for an income pact, an agreement between companies and workers that distributes the damage of inflation with a limit on profit margins (the ability to turn sales into profits, after subtract costs) and multi-year salary increases.

The most orthodox experts of the current liberal paradigm warn of the risk of a spiral of prices and wages. A threat that presupposes a feedback process of salary increases in pursuit of unattainable inflation.

The most heterodox and the most social economists consider that this spiral of prices and wages is far from occurring, and that "what is worrying is that the loss of purchasing power is consolidated", as Nacho Álvarez, Secretary of State for Social Rights, on Twitter, while business margins grow.

The problem pointed out by these latest experts is that the loss of purchasing power could become a major macroeconomic problem, affecting consumption and therefore economic growth, already damaged in recent months by the energy crisis and uncertainty. In addition, the economy faces the threat of a Russian gas cut in the coming weeks that will have a severe impact on the eurozone, and finally in Spain.

"Household consumption, the main pillar of the economy (it represents around 55% of GDP), is also weakening. Both retail sales in real terms and those of large companies inflected downward in the month of July CaixaBank's real-time consumption monitor, which follows the evolution of spending made with the entity's cards and that which is carried out at the bank's terminals in stores, points in the same direction and anticipates that this trend will has maintained during the month of August", explains Oriol Aspachs, economist at Caixabank Research.

Added to the abrasive price rises is the cycle of increases in interest rates that the European Central Bank (ECB) began in July. And that continued last week, with the largest increase since the euro existedand that they intend to continue in October and in the following months, with the aim of stopping fueling inflation by making loans, and also mortgages, more expensive.

Thus, the prescription agreed upon by the International Monetary Fund (IMF) and the central banks to combat price increases is to influence the shift towards monetary orthodoxy, whoever that fails. Gita Gopinath, the body's number two, called at the end of August at the monetary policy meeting in Jackson Hole (USA) for "more aggressive measures, even if that means a sharp cooling of the economy and an increase in unemployment, if inflation It's unexpectedly persistent."

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