The new minimum wage will entail "more risks for those who earn less"

The new minimum wage will entail "more risks for those who earn less"


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The Council of Ministers today approves raising the minimum wage (SMI) to 900 euros per month in 2019. The amount of the minimum wage is usually approved by decree at the end of December, for its entry into force on January 1 of the following year. The budgetary impact of this measure translates at 340 million euros for next year, as stated in the agreement signed between Pedro Sánchez and Pablo Iglesias. Currently, the SMI is located at 735.9 euros per month, so raising it to 900 euros means an increase of 164.1 euros more per month compared to this year, 22.3% more. This increase will affect 1.3 million workers, not counting employees in the home and agriculture. The Ministry of Labor foresees that the increase of the SMI to 900 affects almost 20% of the workers of commerce, to 14% of administrative activities, to 10% of catering, to 7.7% of other services, to 6.8 % of health activities and also of the Public Administration and defense, to 6.3% of professional activities, to 6.2% of education and to 6% of workers in the manufacturing industry.

The Secretary of State for Social Security, Octavio Granado, affirmed at the beginning of December that with the rise of 22% of the Minimum Interprofessional Salary (SMI) there may be entrepreneurs who are "tempted to hire instead of 20 workers to 18," especially in the agricultural sector. «This may exist and there is no sense in denying it», Pointed out the Secretary of State.

Asked about the impact of this measure on the economic, most experts consulted by ABC believe that it will have little impact on poverty and that it will entail more risks for those who earn less. Both Marcel Jansenn, professor of Economic Analysis at the Autonomous University of Madrid (UAM), and Florentino Felgueroso, associate researcher at Fedea, have agreed that the measure agreed by the Government and Podemos offers many questions and is not the best instrument to combat labor poverty. In this sense, both have pointed to the fight against precarious work and measures such as the salary supplement or a negative tax, as initiatives more effective than the increase agreed for the Minimum Interprofessional Wage (SMI).

In particular, Jansenn has referred to the possibility that there is "some negative effect" on the creation of employment as it is a very substantial rise of the SMI of 22.3% – "especially in young low-skilled, and that this rise can make it difficult for them to enter the labor market ». In this regard, he recalled the high rates of youth unemployment in Spain. For example, among those under 25 years of age, unemployment reached 33.6% in August, according to the Ministry of Labor. "When labor poverty is due to precariousness, the rise in the minimum wage has a very limited impact on reducing poverty," he added.

As Felgueroso of Fedea recalled, between 5 and 6 million people do not receive the minimum inter-professional salary due precisely to the precariousness of their working conditions (a shorter working day, for example), and has warned against «a contagious effect or of sliding over all wage scales, having a greater impact on average wages and prices. "

In this line, he added that, in principle, the SMI is aimed at the less qualified, "although there is a small part covered by agreements, the others will be affected: the most direct is the ajueste in hours. That is to say, to work more hours irregularly although in the payroll it says that the minimum wage is charged ». Felgueroso has verified that it is difficult for the inspection to control the working hours and has pointed out that "the saving in costs – for the companies – not only has to be produced in the salary". To which, the specialist of Fedea has indicated, that two thirds of the sectoral temporary contracts are re-hiring of people who had previously worked in the same company. "The easiest thing is to regulate the SMI by decree, rather than fight against precariousness that is more difficult than a simple regulation," he concluded.

More temporary contracts

A line defended also in a recent study, the president of the Institute of Economic Studies (IEE) José Luis Feito, which concludes that the rise of the SMI along with the minimum basis for contributions to Social Security is "harmful to part of the most vulnerable workers ». "The increase in the minimum wage cost can also affect the composition of employment by increasing the proportion of temporary contracts, reducing the length of the working day or going to work in the underground economy," says Feito in this report.

Also, Feito adds that to assess the cost of this rise is not enough "to analyze the percentage of the salaried population with wages close to it" and considers necessary "to study the characteristics of the active population in unemployment." "The level of the SMI could be a barrier to the employment of a significant part of the unemployed," says Feito.

Luxembourg, the highest minimum wage

If we look at the rest of the EU, we find that Luxembourg is the European country with the highest minimum wage (1,999 euros per month), according to Eurostat data. They are followed by Ireland (1,614), the Netherlands (1,578), Belgium (1,563), Germany and France (1,498) and the United Kingdom (1,401). On the lower side of the table we find Bulgaria (261 euros per month), Lithuania (400), Romania (408), Latvia (430), Hungary (445), Croatia (462), Czech Republic (478), Slovakia (480), Estonia (500) and Poland (503).

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