The signal of a worthy SMI | Economy

The signal of a worthy SMI | Economy

The recent agreement for the budgets between the Government and Unidos Podemos has given rise to an angry political and public debate in recent days. Regardless of the fact that there are no perfect budgets, and these are not. I disagree with a good part of the tax rise that largely falls on the usual and also does not "pedagogy" of the enormous fiscal and economic challenges of the country. But I have found some criticisms excessive – with a considerable political burden related to the matter or not – as if these budgets were very different from those approved in previous years.

There is something new, of course, but it maintains the general lines of the previous budgets, namely, "comply without further" with the objectives of Brussels, worry little about economic growth and the medium-term financial situation and make the necessary concessions to achieve parliamentary approval. Pure inertia In recent years there has been no real reform of the Administration – despite the margin that gave economic growth since 2014 – to allow permanent savings. Neither has the financial sustainability of the whole budget been guaranteed, or of some important items -such as pensions- or of the accumulated public debt. We'll see what Brussels thinks, but seeing Italy, I doubt there's excessive outside noise.

I think it is more interesting to analyze another of the measures of the agreement: the rise of the Minimum Interprofessional Salary (SMI) from 735 to 900 euros per month. I think it is news that can come well to Spanish society. It does not fix everything, of course, but it satisfies a relevant social aspiration. While economists defend linking wages to productivity and the agreed measure will not be good for everyone, I think there are reasons that weigh more and support the rise.

First, the financial crisis has brought more inequality and more poverty. For this reason, it seems opportune – more and more authoritative voices are arguing for this – that although government intervention in the general process of wage negotiation in the private sector must be minimal, the authorities in advanced economies that so decide must have a role in fixing the remuneration of the underprivileged, where a decent level can be a more satisfactory solution for society in a broad sense than the pure market. Moreover, when in recent years the weight of compensation of employees in GDP has fallen, which points to the existence of some margin to raise wages, especially the lowest.

To make matters worse, a country like Spain that always compares with the surrounding countries – although it is true that unemployment is much higher and the labor market, more dysfunctional – has a SMI substantially lower than others like the United Kingdom, Ireland, Germany and France (all above 1,400 euros). In sum, a necessary convergence and dignification, probably, in addition, with positive effects on consumption.


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