Spain’s new jobs to have a €100 flat rate on social contributions

The Debate on the State of the Nation in the Spanish Parliament is usually an event closely followed by many journalists but few citizens. That is the reason why it would be convenient to review those measures announced by president Mariano Rajoy on Tuesday that most concern Spaniards’ pockets. A couple of messages to note: first, a €100 flat rate for social security contributions of new jobs meeting certain requirements, and second, a tax cut that can benefit 12 million of workers, according to PM Rajoy.

Staging publicity stunts to hit headlines has the disadvantage that one must explain them afterwards. Spain’s Minister of Finance Cristóbal Montoro has tried to shed some light about those tax cuts: employees earning less than €12,000 will not pay for deductions (at this moment only workers with an income under €11,200 are exempt from doing it), although it still remains unclear the number of contributors who will be benefited from the initiative.

Tax experts have already warned about the risk of comparing that €12,000 benchmark with current situation when the government is about to undertake a fiscal reform which could change tax structure completely.

The €100 flat rate measure on social contributions for new jobs is much more clear since it intends basically to foster permanent contracts more than alleviate companies’ tax charges. Up until this point, little employment that has been created is precarious.

It will take time to see the impact of these measures but at first sight it is reasonable to wonder if Rajoy’s tax cuts will compensate the strong increase of deductions he himself fixed when just took office, thus breaking electoral promises.

As regards flat rate in social contributions, it should be welcomed if it really enables to promote permanent contracts. At this point, it would be also interesting to question the near zero effect of labour market reform on job creation: unemployment rate has decreased slightly thanks to a drop in working population figures, but the amount of jobless people is still around 6 million people, an unthinkable number for the fourth euro zone’s economy.

Just a journalistic wink before conclusion. It is very noticeable that the most reluctant president to have contact with media in all Spanish democracy’s history started his speech in the debate on the estate of the nation talking about international media say about Spanish economy.

Political leaders should know that resorting to newspaper archive is somehow risky. That international media that now praises Spanish economy is the same that some months ago, Mr Rajoy also being president, illustrated their controversial articles on Spain’s poverty with pictures of people scavenging for food.