The current energy crisis makes a dent in salaries: "In the 70s linking salaries to the CPI was taken for granted, today it is not considered"
Alberto Carmona is a CGT union delegate. His union is negotiating the renewal of the state contract for the Contact Center sector, expired since 2019, and the employer has offered a 0% wage increase for 2020 and 2021, and an advance payment of 2.5% in 2022, while they continue the conversations. With this starting point, he finds it difficult to defend his purchasing power and that of his colleagues with a clause that links salaries to the CPI (Consumer Price Index). "My father [trabajador jubilado desde hace ya casi 20 años] I did have that protection," he laments.
"That type of clause was signed by almost all sectors, companies, administrations in the 70s and 80s...", recalls José Luis Pérez, who, as a delegate of the Autonomous Collective of the Ministry of Defense, negotiated in those years of abrasive inflation the first collective agreement of the institution, and ensures that linking salaries to the CPI was not a problem. "We had to fight the extra hours, the night shift, the dangerousness...", he enumerates. Protecting workers from inflation was taken for granted.
Today it is not raised, with few exceptions, although the inflation records of that world oil crisis are being reissued, such as the 10.8% rise in prices in July, not seen since 1984. According to the latest data from the Ministry of Labor, of the total of 2,428 agreements "with economic effects in 2022", only 358 had a salary update clause to fully or partially compensate for inflation. A figure slightly below 15%. If the number of workers protected with this type of clause is observed, there are 1,737,503, 25% of the 6,872,707 whose working conditions are governed by an agreement.
In February, just before Russia began the invasion of Ukraine and definitively detonated inflation -which mainly hits vulnerable families due to its origin in energy and its transfer to food, both basic needs that add up to most of the spending of poorest, along with housing-, the Bank of Spain has already pointed out that the agreements that are updated with inflation had fallen from 70% to 15% in the last 20 years.
In the same vein, the European Central Bank (ECB), using data from the eurozone as a whole, made a comparison in its latest economic bulletin between the evolution of wages in the oil crisis with respect to energy inflation in these months . According to the institution, the share of wages in GDP, that is, in the growth of economic activity, rose to nearly 4 percentage points in the 1970s (see graph), mainly due to the increase in real wages, having take into account inflation. In the current energy crisis, this share of wages in GDP in the eurozone is negative. Or what is the same, price increases are denting wages.
The consequences of the lower protection of workers can be seen with other more up-to-date data (the ECB's calculation remains in the first quarter of this year). 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 wage increases agreed in the agreements this year are studied, the improvement remains at 2.56%, until July, according to the latest data published by the Ministry of Labor. For the eurozone as a whole, this increase is 2.1%, at the end of the second quarter, with the forecast that average inflation will end above 8% in 2022. "It should surprise no one", comments Oliver Rakau, chief economist for Germany at Oxford Economics. This figure was even below the 2.8% that was seen between January and March, when the expert recalls that there were "exceptional payments".
The story was different in the oil crisis. José Ramón Palacios, a CNT trade unionist, was part of the first workers' commission received by the Ministry of Labor in the Transition, at the end of the 1970s, after a three-month strike in the construction sector. "We were negotiating the agreement and we got 100% of what we asked for," he celebrates. "The agreed base salary was doubled, because inflation was very high, and a jump was needed," he continues.
"In approximate figures, the base salary went from around 400 pesetas a day to almost 800 pesetas," says Palacios, who acknowledges that "it was usual to achieve these improvements", and adds that "employers had assumed wage increases with the minimum CPI, they could not discuss them... and the acquired rights were respected".
"There was a drastic change since the mid-1980s, with the second government of the PSOE, when the trend of always improving began to break," he continues, and the workers were losing bargaining power. Until today.
“The crisis in Ukraine has made us poorer, around 7% [en renta de las familias respecto al PIB] Until now [sin incluir los últimos récords de inflación] according to our calculations”, explains Ángel de la Fuente, executive director of Fedea, in a recent document. And meanwhile, the ECB has decided to initiate a cycle of increasing official interest rates to tighten financing conditions and raise the cost of loans and mortgages, with the aim of stopping fueling inflation. A strategy that increases the risk of choking consumption, and activity in general, and thus to cause a recession.
"In general, households with lower incomes have less margin to absorb price increases without sacrificing anything essential and also spend a greater part of their expenses on food, energy and transportation," continues Ángel de la Fuente, who calls for the income pact, which practically since the Russian invasion of Ukraine began, the government has tried to promote in order to distribute the blow of inflation between companies and workers.
The proposal from April of the Workers' Commissions (CCOO) and the UGT was a salary revaluation of 3.5% for this year, 2.5% for 2023 and 2% for 2024. A multi-year agreement. Although, this same Monday and in response to the need to protect the most vulnerable -which is even recommended by the ECB itself or the IMF-, UGT requested an increase in the minimum wage (SMI) of 10% up to 1,100 euros per month, compared to the negotiation, which will begin in parallel in the coming weeks, on this new rise in the SMI, to which the Ministry of Labor of Vice President Yolanda Díaz has committed.
For its part, the talks for the rent agreement have been broken for weeks, and from the employers there is no proposal on the moderation of profit margins (the ability to turn sales into profits), which have not stopped increasing in recent months, especially in sectors related to energy. The unions have already promised an intensification of the protests in the autumn, as a continuation of the campaign they started in June under the slogan "salary or conflict".
"Before this [la pérdida de poder adquisitivo], there are basically two options: accept it and try to distribute the loss of income in a more or less equitable way, or try to pass the ball to the neighbor, raising our prices or wages. If we opt for the latter, we will continue to be 7% poorer on average, but the distribution of costs will be very unequal and we will set in motion a spiral of prices and wages that will tend to make inflation chronic and will aggravate the problem, among other things, because it will make us lose competitiveness with respect to other countries less affected by the crisis or that know how to deal with it better”, explains the Fedea economist.
The debate among experts is hot, and the main point is that due to the duration of inflation and the war and the widening gap between price increases and improvements in corporate profits and wage growth increases the risk of social conflict, and the spiral of prices and wages described by Ángel de la Fuente.
"The objective of the policy must be to help the most affected productive sectors and segments of the population, first to overcome the shock without catastrophic consequences, and then to adapt to its permanent component", continues the deputy director of Fedea.
According to different variables handled by the debt rating agency Moody's to compare the economies of the EU and its link to inflation, workers in Spain start from a position in which it is difficult to achieve anything more than "salary moderation" in the face of the current bite that price increases imply for consumption capacity. And then the feared spiral of prices and wages will be far away, which entails greater permanence of inflation combined with a severe risk of recession.
The low union density in our country stands out, which is only lower in France. Barely 12.5% of workers are members of a union. In the neighboring country, 8.9%. This contrasts with 65.2% in Sweden, 49.1% in Belgium or 32.5% in Italy.