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

Costa Levante News - - NEWS -

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.

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