And what if salaries in Spain are increased as Popular’s chairman proposes?

Forty years of democratic Spain: No resemblance to what it wasSpain has been profoundly transformed since the 1978

Just when the pre-electoral debate is going in the same wearisome direction as alway about the need to raise the minimum wage or left-wing parties are having a shouting match over the suitability of some proposal or other related to establishing a basic wage, Popular chairman Angel Ron has entered the arena. He is asking companies to increase salaries in line with productivity, with some nuances, in order to speed up the consolidation of economic growth.

After years of crisis, Spain has succeeded in substantially increasing productivity, basically by reducing labour costs, and inflation is low. So Ron concludes that it is time to improve productivity via better quality and, thus, higher paid jobs to strengthen growth. For this to work, there needs to be more of a commitment to R&D investment and to measures to boost the skills of the long-term unemployed to reduce structural unemployment.

What the business community or trade unions’ reaction has been to the banker’s words is not yet known, which could be characteristic of an unstressed society. Just as in the same way nothing has come out about the reactions to the fact that the IBEX-35 listed companies had never before registered such high profits, in their totality, as in the first half of 2015, clocking up a 40 percent increase to 21.626 billion euros from a year earlier.

Accepting the fact that not all companies are in a situation to be able to raise their employees’ salaries, for a wide range of different and important reasons, Ron’s proposal is clearly at least worthy of a discussion, weighing up the pros and cons of a measure of such substance. In the short-term, it would have repercussions not only on corporate profits but also on improving confidence, the recovery in consumption, the increase in production,  job creation and, in the end, on the restarting of the economic cycle which, sooner or later, will run out of steam.

 

 

 

 

 

About the Author

Carlos Díaz Guell
Editor at consensodelmercado.com and innovaspain.com, Carlos began his career in financial journalism as founding member of El País. He's been communications director of Bank of Spain, member of the ECC at the European Central Bank, Institutional Relations director at Iberia and editor at La Economía 16 magazine.