The strong growth in inflation at the end of 2021 led to a decline in citizens’ purchasing power. This was the result of bottlenecks in the post-pandemic economic reopening process, which extended throughout 2022 and most of 2023, driven by higher energy prices following the Russian invasion of Ukraine. Although the increase in the consumer price index was compensated by wage increases, workers’ purchasing power has not yet recovered all the ground it lost at the end of last year. Various reports and data published in recent months suggest that this goal can be achieved throughout the year itself.
The last document that supports this thesis is the note on the economic situation published by the State Ministry of Economy last August. Specifically, the report states that the data on wage costs and inflation for the first quarter of the year indicate a full recovery of purchasing power in the autonomous community, a process that began last year. As for the situation in Spain as a whole, the document published by the Spanish government avoids drawing conclusions about its evolution.
The report notes that “labor and salary costs in Catalonia grew by 3.8% and 4.2% respectively in the first quarter of the year, outpacing inflation, reflecting the continued recovery of purchasing power.” In fact, if you look at the cost of hourly wages, the increase is much greater, at 7.3%. The document indicates that salary increases will be maintained above the CPI from the first quarter of 2023.
If we take 2019 as a reference, the last year before the pandemic and the rise in inflation, as a rule, we can see how inflation outpaced the increase in wages in Catalonia in 2021, and it advanced clearly in 2022, being slightly higher than in 2023. In the case of Spain as a whole, the evolution follows the same path, although the distance between salary costs and the consumer price index is slightly greater. Thus, the data indicated in the Secretariat’s report are not yet sufficient to confirm the recovery of purchasing power, but they indicate that it will happen soon.
Agreements recorded increases of 3% through July, coinciding with a decline in inflation.
There are other indicators that show a change in trend, such as the evolution of agreements in Spain. Data from the Ministry of Labor updated in July indicate a cumulative increase in salaries of 2.99% in the sector and 2.86% in the business sector. On the other hand, inflation reached 2.8% in July, six-tenths lower than in June, due to moderation in oil, fruit and electricity prices. The coming months will be key to confirm the slowdown in inflation.
The agreement figures are in line with the collective bargaining agreement between the Confederation (AENC). The agreement between the unions CC.OO. The CGT and the EDEC recommend a 3% salary increase for this year and for 2025, with a salary review clause that, in the event of a deviation from inflation, could include additional increases of up to 1% for each of the agreement years (2023-2025). “The agreement figures are usually lower than the real figures of what employees see, because there are many workers outside the agreement or above it,” says Joan Ramón Rovira, head of the Barcelona Chamber of Commerce’s studies office.
Another factor to take into account is Josep Oliver, emeritus professor of applied economics at the Autonomous University of Barcelona (UAB): the recovery in purchasing power is not the same for the entire society. “In the consumption basket of a modest family, the weight of food can reach 40%, while in the middle class this weight can reach 20%. The evolution of consumer prices has a very different impact depending on the income of each family unit.
The 7.3% increase in hourly wages in Catalonia and 7.2% in Spain also has a negative side in the economists’ analysis. “There is a risk that these wage increases will come at the expense of companies’ productivity,” adds Oliver. “These 7% increases are not sustainable for a long time,” says Rovira.
The Spanish government indicates that wage cost increases have exceeded the consumer price index since 2023.
Not all expectations
It indicates an immediate recovery. Recently, the Organization for Economic Co-operation and Development (OECD) published the report Employment forecast 2024, Which puts the focus on
The fact that Spain is among the developed countries where real wages have fallen the most since the start of the pandemic.
In this sense, the document makes it clear that despite the above wage increase,
Inflation in 2023 and early 2024, this
The increases did not help make up for the loss.
Purchasing power of years
Previews
Specifically, salaries remained 2.5% lower in the first quarter of 2024 compared to the fourth quarter of 2019, the document notes. The data contrasts with strong increases in the minimum wage among professionals, by 26%, which benefited the most precarious workers.
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