Union demand leads to triple average wage increase

The indignation launched by the majority unions, demanding for this year a wage increase by agreement which is around 4%, threatens to shake up the recent development of collective bargaining in Spain. If the union demand succeeds, the wage increase would almost triple the average advance recorded last year, which stood at 1.47%.

A rise of such intensity, in a single year, would constitute a completely abnormal event in the historical series, to which must be added the associated risks of a rally in wages so sudden in times of high inflation like the current. It is not in vain that such brutal increases in labor wages are extremely counter-productive, insofar as they tend to have repercussions on consumer prices and to anchor them at high levels. These are the dreaded side effects of inflation.

The possibility of an intense increase in wages subject to the agreement this year is not based solely on the very ambitious trade union demands, which have already come, in certain specific cases, to defend increases up to 5%as revealed by the employers’ association of small and medium-sized enterprises Cepyme.

Moreover, the very evolution of the negotiations, in the barely two months that have passed in 2022, points in the same direction. Specifically, data from the Ministry of Labor, relating to the last month, show that the average increase in wages in collective agreements, revised or signed with effect from January this year, amounts to 2%.

Already at pre-crisis level

This is the highest rate since 2019, when inflation levels were very different and, above all, when the effects of the economic crisis derived from Covid-19 were still far away.

Even more striking is the fact that the percentage increase in wages per agreement between December 2021 and January 2022 is around 0.5%, a totally unusual rate, due to its high amount, in any year in the other. .

And there is one more third driver likely to contribute to overheating wages in this exercise. The labor reform recently approved in Congress modifies its 2012 predecessor with regard to the pre-eminence of company agreements over branch agreements.

Today, with the changes agreed by Labor with social agents, sectoral agreements again have primacy, which makes it easier for companies to be forced to pass on the current high inflation to the salaries of their staff. , despite expectations that prices could ease as early as next May.

Moreover, the declared objective of the unions is to once again generalize salary review clauses, which protect salaries from losses of purchasing power.

This legal figure has shown a marked decline in recent years, characterized by much more moderate levels of consumer prices than current levels, capable of exceeding 6% according to the final CPI data of last January, published by the INE.

Wage review clauses

As a result of this process, out of a total of 2,866 collective agreements registered last year, only 15.8% (456 in absolute terms) included a salary review clause. Of these, an even smaller number, 354, envisaged this provision being applied retroactively.

The unions now want to propose a return to a situation similar to that of the year 2000 when approximately half of the collective agreements provided for this type of cushion against price increases.

Since 2008, the crisis forces it to be left more and more in disusewhich had an undeniable positive effect in promoting economic recovery after the crisis that lasted until 2013. Wage moderation led to the phenomenon called internal devaluation, which allowed Spanish exports to gain competitiveness in international markets .

In the current context, the challenge now arises of preserving this competitiveness by dealing with the undeniable loss of purchasing power suffered by wages in the face of very high inflation.

This loss is undeniable when you consider that the average increase in work-related compensation, of 1.47% per agreement in 2021, was well below the average CPI rate that year. However, there are other solutions that go beyond rapid and large salary increases in a single year, such as those now being considered again.

The employers’ association CEOE has already proposed that in the future CCT the salary guidelines be redefined with a longer time horizon, possibly three years, in order to have more margin to compensate for the losses of purchasing power suffered without running the risk to reinject inflation.

William M. Mayer