The employers resist raising wages while corporate profits do not stop growing

The meeting this Wednesday ended with “progress”, the unions pointed out at their departure, especially on what issues will be addressed in this possible new collective bargaining agreement (AENC) and on the approach of the CCOO and UGT, but the employers do not They revealed some proposal at the table. “We have established ourselves for the first fortnight of the month of April and that is what we can tell you because the thing has not given much more of itself,” said Maricruz Vicente, CCOO’s confederal secretary of Trade Union Action and Employment, after the meeting. .

The unions had already unveiled their offer to start negotiating: a salary increase of 5% in 2022, 4.5% this year and 3.75% in 2024, plus a safeguard clause that would allow higher increases after the fact as prices evolve. and – as a novelty – also taking into account the economic situation of each sector, as a gesture towards companies.

Although the date of the meeting has been delayed and the meeting has been expected and demanded by the unions for months, the employers have not come up with an approach to expedite the talks. “They don’t want to get wet,” explains a union source.

The employers and the unions have sat down again to negotiate almost a year after the dialogue for a great state pact on wages broke down without an agreement in the middle of the inflationary crisis. After a 2022 of soaring prices, even above 10%, of intense loss of purchasing power of workers and recovery of company benefits, which have risen seven times more than wages, the battle for wages faces a second return this 2023. “2022 cannot be forgotten”, reiterate the majority unions.

CCOO and UGT insist on the “urgency” of raising wages to recover the purchasing power lost in 2022, key for domestic consumption and the country’s economy this year. They also demand an increase in remuneration based on a logic of “sharing” benefits and damages derived from the inflationary crisis, but the employers seem anchored in their resistance.

Last year, the bosses argued that raising wages further fueled inflation and could aggravate the price crisis. Also that companies could not face more cost increases, already drowned by increases in energy and other goods, something that businessmen reiterate again in their public interventions in the face of this new round of talks.

But the official data are not reflecting this situation of difficulties in the companies, but, on the contrary, they show a significant increase in their profits. The latest publication of the Bank of Spain’s quarterly Central Balance Sheet (CBT) reported earnings growth of close to 20% on average, with increases of up to 25% in retail and hospitality, depending on the evolution of the GVA (value added gross) in 2022.

If other variables such as the Gross Economic Result (REB) are observed, the increases are greater, of 40%, for the average. In both cases with respect to the previous year and with data up to the third quarter of last year. In 2021, GVA growth was just over 10% and REB was almost 30%. The falls in 2020 were 20% and 40%, respectively.

Benefits at the cost of raising prices and containing wages

This same Wednesday, the Bank of Spain admitted that “a certain upturn in business margins has been observed throughout 2022, although with a high heterogeneity between sectors and companies”.

The institution walks on lead feet when it analyzes the ability of companies to turn their income into profit. The main reason for this caution is that in an inflation crisis like the current one, the growth in margins implies that companies have transferred the rise in costs (energy, raw materials, suppliers…) to sales prices, thus raising Your profits.

This conclusion forces companies to negotiate a greater share of the damage from the inflation crisis. That is, to raise wages. The data already leaves little doubt. Business margins increased “in the final stretch of last year, in such a way that it was slightly above the levels registered before the start of the pandemic”, according to the Bank of Spain and can be seen in the graph.

European Central Bank President Christine Lagarde speaks much less cautiously about rising margins. “So far, real wages have fallen substantially, while corporate profit margins have widened in many sectors,” she said in a speech on Wednesday.

“Companies’ profit margins continue to grow, in part because some take advantage of imbalances between supply and demand to test consumers with large price increases, above the increase in their costs. But in the absence of a persistent increase in market power, this can only continue to the extent that demand remains resilient. Otherwise, companies will have to absorb cost increases at margins and price pressures will start to ease,” Lagarde explained. Although it must be borne in mind that the president of the ECB always refers to the whole of the eurozone.

In Spain, regarding the transfer of costs to sales prices, the Bank of Spain assured that “most of the transfer of past cost increases to consumer prices should be completed in the course of 2023. While the The anti-inflationary effects of the most recent decreases in the price of energy should be felt more intensely after 2024”. In other words, companies will continue to raise their margins in the coming quarters.

The monetary institution goes even further: “The existence of asymmetries in the transfer to consumer prices of cost increases compared to cost falls cannot be ruled out. In the case of energy –mainly oil–, the economic literature tends to find symmetrical effects. However, in the case of agricultural raw materials, different works point to a certain asymmetry, so that cost increases would be transferred more intensely to consumer prices than cost falls”.

In the first months of the year, inflation remains high, standing at 6.1% year-on-year in February and with basic products skyrocketing. Meanwhile, wages are rising somewhat more than months ago, but still a long way off: they rise by half that of prices, 2.9%, according to the average increase agreed in the collective agreements until February. In those signed at the end of 2022 and the beginning of 2023, higher increases are being signed and also more safeguard clauses to protect purchasing power based on prices.

CCOO and UGT, however, warn of a hidden –and problematic– side of these data: an increase in inequality between workers, with “two-speed” collective bargaining in the absence of a state wage agreement. On the one hand, those who work in centers or sectors with more union and mobilization power are achieving higher wage increases, many times thanks to organizing strikes and protests. On the other, there are the weakest – and often already more precarious – templates, where the greatest losses in purchasing power are concentrated, the unions explain.

Companies expect to improve their sales

But almost a year of rising business margins later, the bosses’ positions are hardly budging. In its analysis, the Bank of Spain highlights the differences between large and small sectors and companies in the evolution of profit margins in this inflation crisis. And CEPYME, the employer of small and medium-sized companies, insists on this heterogeneity, lamenting a lower growth in sales at the end of last year, especially among the smallest companies.

However, the forecast of the companies themselves indicates an improvement in the coming months. The most general data from the latest business activity survey of the Bank of Spain itself, known as EBAE, indicates that “Spanish companies expect strong growth in sales in the second quarter, after suffering stagnation between January and March.”

This survey reveals the expectation in the next quarter of the largest increase in billing since the first quarter of 2022. A strong growth that coincides with the forecast of the lowest increase in costs (energy, raw materials, salaries…) of the entire company. inflation crisis.

The survey includes a sample of 5,707 companies and was carried out between February 13 and 27. Therefore, it does not include the impact of the financial turmoil after the fall of Silicon Valley Bank in the United States and the bailout of the Swiss bank Credit Suisse.

The unions consider that “there are no excuses” for not raising wages given the economic figures of Spanish companies. “This is a social problem of the first magnitude, it can exacerbate a problem of inequality in our country and it is also an economic problem in the medium term,” insists Unai Sordo, CCOO leader, this Wednesday from Castilla y León. “If there is no agreement, the conflict in Spain will grow exponentially,” warns Pepe Álvarez, general secretary of the UGT.