Salaries are too low warns Banco de España
Central bank says salaries are not rising after the crisis and this is causing an economic growth slowdown and less income for state pensions
By James Parkes SPAIN'S economic recovery is being slowed down by the belowaverage salary increase since the end of the crisis.
This is the warning issued this week by the Banco de España under governor Pablo Hernández de Cos.
Salary increase estimates made by the central bank in 2013, when the end of the crisis was becoming clear have proven far too optimistic - around 0.4 percentage points below forecasts for 2016 and 2017.
Until June, the previous governor Luis María Linde was a firm defender of salary contention, but this has backfired on the institution's own forecast for economic recovery. Historic data Since the euro was launched in 2003 and until the crisis broke out in 2009, salaries in Spain increased more than in the rest of the EU, but during the crisis, the exact opposite occurred and wages in Spain suffered more in many sectors being frozen or even reduced.
Economic recovery should have reverted the trend, but this has not happened according to Banco de España reports.
In normal circumstances, an increase in employment, which has occurred in Spain since 2013 despite having once of the highest unemployment figures in the EU, comes along with an increase in salaries - experts say a 1% increase in employment generally generates a 0.3% increase in salaries.
Once of the main reasons this has not occurred according to the Banco de España is the proliferation of so-called involuntary part-time contracts where the employee would like to work more hours but the company will not allow it.
The number of these contracts has increase four-fold since the crisis and now represents 8% of all employment contracts signed.
In many cases, companies have reduced their payroll by converting employees’ full-time contract into part-time ones.
All this have a knock-on effect on the state pension funds. The higher the salaries, the more taxes are paid into the social security coffers - however low salary increases are simply increasing the state pension deficit. Andalucía will hold its regional election on December 2 after PSOE president Susana Díaz made the announcement on Monday. The ballot will take place three-and-a-half months before the scheduled end of the four-year term. Analysts says Diaz has called the election as she is still ahead of the poll surveys but fears the gradual wearing of Pedro Sánchez's PSOE government in Madrid could affect her. The PSOE has always ruled in the southern region, although in the last election the PP was the most voted party. However an agreement with centrists Ciudadanos allowed the socialists to stay in power. The ERE scandals that have affected several former socialist presidents and regional Cabinet members have also deteriorated the party's image in the region.