In an unexpected move, businessmen came forward this week to be the first to place a figure in the debate on the 2024 minimum wage. In the face of harsh criticism of this measure in the past, including their refusal to negotiate on several occasions during Last term, now the employers’ associations CEOE and Cepyme have proposed an increase in the SMI of 3%. Although the figure is “insufficient” for unions and also for Labor, the step by the employers represents a notable change in attitude on an issue of strong conflict for years, but in which there are more and more actors who advocate improving salaries more low. The Ministry of Labor has called unions and employers next Thursday to negotiate this increase.

The CEOE’s maneuver has surprised for several reasons. On the one hand, because the continued increases in the minimum wage in recent years, and especially the strong increase in 2019 (22%), have been marked by harsh criticism from employers.

For example, the repeated alarms about the destruction of tens of thousands of jobs due to increases in the SMI, common especially in Cepyme (small and medium-sized business employers), which estimated last year – with its own calculations and without explaining the methodology – that the increases in the minimum wage since 2018 had caused “the disappearance of 217,500 jobs.”

Businessmen have also warned of the destruction of thousands of companies, due to the large increase in labor costs, as well as the possible rise of the underground economy.

On the other hand, the employer’s proposal has caught some off guard due to the current context. Because the businessmen had just launched several very forceful statements against the new progressive coalition government, against the amnesty and the commitment to reduce the working day to 37 and a half hours.

In this climate, also of strong political confrontation with the Popular Party, several voices in the labor world warned that employers were not going to be as inclined to negotiate with the new Executive as in the last term, when a multitude of pacts were closed in social dialogue.

The last reference, the increase in the minimum wage in 2023, was already very marked by the worsening of the relationship between employers and the Executive and the context of this year’s electoral events. The businessmen did not even want to sit down to negotiate with the Ministry of Labor of Yolanda Díaz, which finally agreed with the President of the Government to increase the SMI by 8%, to the current 1,080 gross euros per month.

Studies deny massive job losses

Although there are still some voices that oppose the increases in the SMI, they are becoming fewer and, above all, with less radical criticism. The proposal of Pablo Casado, then leader of the PP, to lower even the minimum wage is far away. It did not last even a few hours, since he recanted and accused the media of launching fake newsbut his words must be framed in the fierce criticism against the increase in the 2019 SMI, together with continuous very catastrophic forecasts that were ultimately not fulfilled.

Because reality, facts and subsequent studies have confirmed that increases in the SMI do not cause debacles in employment. Research has finally leaned towards zero or very limited negative effects on employment, while the positive impact of the minimum wage against inequality and poverty is beginning to be studied.

For example, in 2019, with strong employment growth of around 400,000 jobs, AIReF estimated much lower job creation among low-paid employees: around 19,000 to 33,000 fewer jobs (-0.13% and -0.23%). A study by Professor Sara de la Rica, head of the ISEAK Foundation, concluded that in the first six months no effects on employment were detected. After this period of time, the impact for the year is estimated at around 28,800 fewer jobs, “certainly modest” results, said those responsible for the investigation in El País.

The Bank of Spain calculated a greater negative effect, from 0.6% to 1.1%, which translates into between 94,200 and 172,700 fewer jobs in 2019. The regulatory body nevertheless recognized the existence of an “upward risk” in their calculations.

Furthermore, in recent years the Nobel Academy awarded economists David Card and Alan Krueger, who dismantled the prevailing economic doctrine on the minimum wage. And several international organizations have been leaning towards improving minimum wages, such as the European Commission, but also the OECD, the ‘Club of rich countries’, which described its negative effects as limited and highlighted the importance of the measure in the context inflationary.

A not so new maneuver

Although there are reasons why the CEOE’s move regarding the increase in the minimum wage should have been surprising, the truth is that it is not entirely new. The employers’ association, led by Antonio Garamendi, has demonstrated its pragmatism in its dealings with the progressive government. On many occasions, businessmen have made it evident that, when they consider that they have something to lose and that they can improve the Executive’s measures with an agreement, they try to negotiate to reduce the damages.

It happened in the first days of the first progressive government of PSOE and Unidas Podemos, also with an agreement to raise the minimum wage, up to 950 euros per month in 2020. Then, the employer leaders recognized that their fear was “a thousand euros,” which was the proposal on the Government’s table.

And, although continuous criticism of the negative effects on employment and the excessive cost burden on companies has persisted, the labor market in Spain has performed very well despite all the difficulties of recent years. In this context, business owners have sat down at the negotiating table on several occasions with the same intention: to reduce the increase in the SMI that would be achieved with the unions and the Government alone.

Because when they have not negotiated, in contexts of great political tension and years of few options to reduce the increase (such as 2023), the Executive has legislated hand in hand with CCOO and UGT.

This year, the employers’ proposal of 3% seems designed for a possible agreement, because it is not excessively low, although both the Ministry of Labor and the unions are leaning towards greater increases. At the very least, above inflation (3.8% the average for the year and 3.5% in October), so that the lowest salaries do not lose purchasing power. With the economy slowing down at the European level, domestic consumption is especially relevant.

Furthermore, the goal of the SMI reaching at least 60% of the average salary in the country remains in force, and this would predictably lead to a greater increase. We will have to see what happens at the negotiating table, which the Ministry of Labor has announced that it will convene “imminently.”


Leave a Reply

Your email address will not be published. Required fields are marked *