Fri. Apr 3rd, 2020

The Bank of Spain warns of the negative effect on employment of the rise in the minimum wage

El Banco de España advierte del efecto negativo en el empleo de la subida del salario mínimo

The governor of Bank of Spain, Pablo Hernández de Cos, said on Wednesday that "in general" increase the Minimum Interprofessional Salary (SMI) usually has a negative effect on the job and it affects especially the groups with less training. During his appearance before the Economy Committee of the Congress of Deputies, Hernández de Cos has reviewed the study of the increases of the SMI of 2017 and 2018, although it has avoided referring directly to the one announced by the Government for next year.

The governor has indicated that, "in general," the increase in the Minimum Interprofessional Salary has a negative and limited effect on the total employment volume of the economy, with a special impact on the probability of losing employment in certain groups. In particular, he referred to the young and old with less training, which have a productivity below the average and whose unemployment rate "is still very high".

To questions of the deputies, Hernandez de Cos has indicated that if the results of the studies of the rises of 2017 and 2018 are extrapolated, the rise of the minimum wage to 900 euros next year would suppose the 0.8% loss of employment. However, he pointed out that the expected minimum wage increase is "much more significant" than in previous years and "it is reasonable to think" that the impact "is not linear".

Requests that the SMI increases be designed "taking into account the productivity of the affected workers and their degree of employability"

In any case, he has urged the study of the "affected group" by the measure, since half of them have temporary contracts and half work in small companies with less than ten workers.

With the aim of avoiding the loss of employment and an increase in inequality, Hernández de Cos has advocated that the increases of the SMI be designed "taking into account the productivity of the affected workers and their degree of employability".

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