Spanish labour costs grow sharply in Q1: social security contributions +3.6% and wages +1.7%

Spain employmentIn 2020 around 900,000 jobs could be destroyed

Nominal labour costs in Spain have increased +2.1% in Q1 2019, compared to 0.9% in Q4 2018. It is the largest increase since Q4 2103 (+2.1%).

The cost of social security contributions increased +3.6%, which could be related to this strong increase, as strictly wage costs rose +1.7%. Experts at Bankinter recall that inflation in May was 0.8%, so that increases in purchasing power have been produced, which should be compensated by improvements in productivity to prevent a fall in competitivity.

At the same time, labour costs in the Eurozone have increased more than expected in the same period, with a loss of competitivity (+2.4% vs +2.3% estimated and +2.4% before). As a reference, it is the second largest increase since 2012 (+2.5% in Q3 2018). In terms of purchasing power it was good news because it increased more than CPI (+1.2%). But there is an imbalance with the increase in productivity (+0.3%) and a loss of competitivity of -2.1% (+0.3% productivity – 2.4% labour costs). To put it in a global context, in the US labour costs in March fell -0.8% while productivity increased +3.4%. In this way the US economy has improved its competitivity by +2.6%.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.