June 22, 2021

The Bank of Spain estimates that raising the SMI to 900 euros reduced at least 94,200 jobs

The large increase in the interprofessional minimum wage (SMI) of 2019 to 900 euros, of 22.3%, gave rise to many headlines about its possible effect on employment. The Bank of Spain made a first estimate of a net loss of some 125,000 jobs, which was awaiting a more in-depth analysis, which it published this Tuesday. The conclusions of the regulatory body point to a reduced negative effect with respect to the total of 15.7 million wage earners, from 0.6% to 1.1%, which translates into some 94,200 to 172,700 fewer jobs. The Bank of Spain states that the negative effect was reflected above all in a reduction in job creation, not so much in the destruction of existing jobs, and all the impact is concentrated in the group of workers with low wages.

Yolanda Díaz advocates raising the SMI this 2021 due to the increase in prices

Yolanda Díaz advocates raising the SMI this 2021 due to the increase in prices

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The investigation, which publishes today on its website the organization, specifies that it only analyzes the effect on employment of the increase in the SMI, but emphasizes that there are other elements that must be considered in relation to the minimum wage. “There may be arguments of equity and improvement in the standard of living of some workers, which are relevant when determining the level of the SMI and which are not the object of analysis in this work,” they point out.

The Bank of Spain estimates that around 1.6 million workers were affected by the increase in the SMI to 900 euros per month. This is the group of “affected”, which the study calls, due to the rise in the SMI, who charge the minimum wage and a somewhat higher amount, up to 1,250 euros per month. They account for 10% of the total number of workers, some 15,700,000 employees.

It is in this group of almost 1.6 million workers where the agency considers that job creation slowed down the most due to the rise in the minimum wage, between 6 and 11%, with a balance of between 94,200 and 172,700 jobs less. In total employees, the reduction is from 0.6% to 1.1%.

His estimate is higher than that made by other bodies, such as the Independent Authority for Fiscal Responsibility (AIReF), which also estimated the impact in lower job creation among low-wage employees, but from about 19,000 to 33,000 fewer jobs. (-0.13% and -0.23%).

On this, the Bank of Spain underlines the difficulty of estimating the real impact on employment of the SMI, due to the complexity of accurately detecting the group affected by the rise and another comparable group with which to study the behavior of employment and the effect concrete increase in the minimum wage.

Thus, it recognizes the existence of an “upward risk” for the estimates of job loss as a result of a detailed study of the impact of the SMI in the hospitality industry, where it does not consider correct the comparison of the evolution of employment among the group that receives the SMI and those that are just above, which applies in a general way. In its specific analysis of the hospitality industry, the agency analyzes two other groups of workers that it does consider comparable and, in this case, the loss of employment is lower: 4% compared to 6 or 11% of all those affected by the SMI.


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