Trends in the working poor in Spain
1The workers with the lowest wages are those who have experienced the largest decrease in their income. From 2010 to 2014, the median wage fell by 5.2%, while the earnings of the 25% of the workforce with the lowest wages did so by 7.5%.
2The slight wage recovery of 2016-2018 has not compensated for the previous losses. In particular, the wages of the lowest-paid 25% of the workforce are 6.2 percentage points lower than they were a decade ago.
3In-work poverty has more impact on young people, under-qualified people and women, who are also the workers most affected by job instability (temporary and part-time employment).
We observe that women’s wages stand at around 80-85% of men’s, at all wage levels and at all times, which reflects the gender pay gap. More than 15% of women workers were poor in 2018, as opposed to 10% of working poor men.
The proportion of working poor under the age of 30 is 10% higher than in the case of the older workforce (30-59). Between the ages of 35 and 59 the situation remains largely stable over the years, the percentage of working poor always standing around 10%, with maximum levels approaching 15%, far removed from the 28% reached in 2014 by workers aged between 25 and 29.
If a few years ago employment was assumed to be a way of avoiding poverty and social exclusion, today low-wage employment shows that having a job may not be enough to make ends meet. This has given rise to the term “working poor”, to refer to those people who, although they have a job, are poor because their salary does not enable them to reach a sufficient level of income.
However, in-work poverty is not easy to define (Gutiérrez and García Espejo, 2010; Tejero, 2017), as it combines two concepts, employment and poverty, that can be measured differently and furthermore refer simultaneously to one situation that is treated on an individual basis (being employed or unemployed) and to another that usually pertains to the household (being poor, taking into account all the incomes in the household). According to Eurostat, for a person to be considered active and employed, he or she must have been working for at least 7 months for 15 hours a week. In turn, for a household to be considered poor, its income must be lower than 60% of the median equivalised income. The percentage of people who are employed and earn income below this threshold exceeds 10% of the workforce in Spain. Specifically, in 2018 it stood at 13%, i.e., 3.4 percentage points higher than the EU average according to the European Union Statistics on Income and Living Conditions (EU-SILC).
1. Trend in annual employment income
In this project we have selected all those individuals who had some sort of income from employment over the years 2007 to 2018, using data from the Muestra Continua de Vidas Laborales or MCVL (Continuous Work History Sample), which is based on their relationship with Social Security each year (employment, unemployment, pensions). For the studied population, the annual employment income for the period 2007 to 2018 (Graph 1) is calculated by adjusting for the effect of price rises to provide a measure of income with stable purchasing power (real wages).
This analysis is performed by calculating the median and the quartiles. The median is the value that leaves half of the data on each side. Similarly, the quartiles divide our population into four equal parts. The first quartile marks the boundary of the quarter of the workforce with least income. And the third quartile marks the point beyond which we find the 25% of workers with most income.
Given that the median value in 2007 was 18,919 euros, half of the workforce had an annual income below this sum, and the other half earned more (Graph 1). We can see that the median reached a maximum of 20,216 euros gross in 2009, the minimum being recorded in 2017 (18,478 euros). The first quartile stood at around 13,000 euros, while the third quartile was at about twice this figure.
If the trend in annual income is represented as an index that takes value 100 in 2007 (Graph 2), we find that in 2008 and 2009 income grew, and that higher incomes (above the third quartile) did so to a greater extent. Thus, in 2009, whereas the third quartile was 7.6 percentage points higher than the 2007 level, the first quartile rose by only 3.8 points. When wages started to fall, the effect was greater for lower wages. The drop that occurred as of 2010 caused workers in the third quartile to revert to 2007 wage levels by 2012, while in the same period those in the first quartile had lost 2.7 percentage points. After 2012, the third quartile group had lower income only in the period 2016-2017, standing 2.3 points below their 2007 income. However, the income of the lowest-paid group fell progressively every year, with the result that by 2017 their annual employment income was seven points lower than in 2007. In the last year studied, 2018, a slight wage recovery was observed in the lowest-wage group, although they still fell short of the 2007 income level.
If we consider the trend of the median, we can see that in the first two years of the crisis the median real wage rose by 2.6% in 2008 and 4.1% in 2009. At the time there was much debate on the causes of this increase, because at the same time as wages were rising, the number of jobs was plummeting. Suffice to say that in 2008 more than 1.3 million jobs were destroyed.
It was unclear to what extent this wage increase corresponded to the destruction of low-quality jobs with low wages and the maintaining of jobs with medium and high wages that therefore contributed to an increase in the median wage. It was suggested as an alternative that the rigidity of collective bargaining prevented wage adjustments, and that companies consequently opted to reduce their employment levels (Cuadrado et al., 2011).
Despite this lack of initial response to the crisis, wages decreased as of 2010, especially in 2012, when they fell by 3.4%. It is important to bear in mind that the labour reforms passed in 2009, 2010 and particularly 2012 changed substantial aspects of collective bargaining, which contributed to this cut in wages (Pérez Infante, 2015; Malo, 2015).
In the wake of the strong impact of the crisis, in 2014 the Spanish economy began to recover jobs. However, wages did not pick up. From 2013 to 2015, variations were minor, median annual income remaining around 19,000 euros (in real terms). But in 2016 and 2017 it dropped again by more than 1% per annum. Overall, the accumulated decrease caused the median wage in 2017 to be, in real terms, 8.6% lower than that corresponding to 2009. In 2018 there was a slight increase of 0.3%.
On analysing the interannual variation by quartiles we might get the impression that the drop in wages affected all workers in much the same way (Graph 3). However, we must take into account that although the trend is similar, when growth occurs, it is greater in the third quartile (the workers who earn most) than in the first (the workers who earn least). Thus, in 2008 and 2009, wages in the first quartile rose by 1% and 2.7% respectively. The increases for third-quartile wages were larger (2.6% in 2008 and 4.9% in 2009). The same happened in 2013 and 2015, i.e., wage increases were larger for workers with higher wages than they were for low-income workers. In 2018, however, the small rise that occurred had more impact on lower-paid jobs (first quartile), with an increase of 0.9%.
Sex-disaggregated data show that the trend is similar in men and women, but women’s wages are substantially lower than men’s. Thus, whether we consider the median or the quartiles, women’s wages stand at around 80-85% of men’s, which reflects the well-known gender pay gap (Graph 4).
2. Trend and profiles of low-wage earners in 2007-2018
Having analysed the trend in employment income above, in this section we study the working poor. Here, instead of using annual income, we have used daily earnings in order to avoid differences derived from a smaller number of days worked. A person is defined as working poor if he or she earns less than 60% of the median. Graph 5 shows the trend in the percentage of working poor in the period studied. The base figure for 2007 of 10.9% rose to a maximum of 14.4% in 2014. As of 2017 the figure declined, standing at 12.8% in 2018. We need to bear in mind that, on top of the improvement in the economic context, in 2017 and 2018 there was a sharp rise in the minimum wage, to 707.7 and 735.9 euros a month respectively, which represented a 12.3% increase over the figure for 2016, whereas from 2012 to 2016 it had risen by only 3.4%.
An additional aspect that should be highlighted when analysing low wages is their different impact depending on the workers’ profile. Thus, as we can see in Graph 6, the proportion of working poor women is greater than the percentage corresponding to working poor men. In 2007, the number of women almost doubled that of men. The difference gradually narrowed over the period analysed, yet in 2018 there continued to be a gap of nearly five percentage points.
By age groups, young people between 25 and 29 have the highest risk of experiencing in-work poverty (Graph 7). The difference depending on the age bracket was already sizable in 2007, but it grew very rapidly during the crisis, such that in 2014 the proportion of young working poor was much larger than that corresponding to workers over the age of 35. Thus, 23% of people aged 25 to 29 were in this situation, while in the other age groups the figure stands below 15%. Something similar occurs in the 30 to 34 bracket, although without reaching the figures corresponding to the previous age group. Between the ages of 35 and 59, the trend is very stable. The percentage of working poor was just below 10% in 2007, rising by around two percentage points during the crisis.
The figures corresponding to 2018 dropped visibly in those groups in which in-work poverty had risen most. However, among workers over the age of 35, the decrease was small, and in fact the figures were higher than those for 2007.
Educational level marks another major difference (Graph 8). Thus, we see a negative relationship with the percentage of working poor, with the result that this percentage is lower the higher the educational level. Furthermore, the increase that occurred from 2007 to 2014 was greater among the lower-qualified population. In other words, educational attainment protects against low wages.
Although wages were slow to react to the economic crisis, from 2010 to 2014 the median wage fell by 5.2%, and that corresponding to the first quartile, by 7.5%. The upturn in employment registered as of 2014 was not accompanied by a wage recovery, as wages continued to fall, albeit at a slower rate. Only in 2018 was a modest rise registered. The result was that in that year wages were still at lower levels than they were in 2007 and 2008.
In-work poverty was already a problem before the great recession. Owing to precariousness and low wages, more than 10% of workers could already be described as poor in 2007. The crisis has augmented the problem, especially among young people, people with a low educational level and women. These groups are in turn those that experience most precariousness and most employability difficulties.
The situation currently being experienced has brought economic recovery to a standstill. The present context is quite different to that of 2008, although forecasts regarding the effects of the lockdown resulting from the healthcare crisis which were, initially, short-term in scope, have become extended over time. Unfortunately, the most precarious groups will be those that suffer, once again, the worst consequences in terms of unemployment and low wages.
CUADRADO, P., HERNÁNDEZ DE COS, P. and IZQUIERDO, M. (2011). “El ajuste de los salarios frente a las perturbaciones en España.” Boletín Económico del Banco de España, nº 2, pp. 43-56.
GUTIÉRREZ, R. and GARCÍA ESPEJO, I. (2010). “Empleo y pobreza en España”. Panorama Social, nº 12, pp. 29-40.
MALO, M.A. (2015). “Los impactos de la reforma de 2012 en la negociación colectiva”. Cuadernos de Información Económica, vol. 246, pp. 23-34.
PÉREZ INFANTE, J.I. (2015). “Las reformas laborales en la crisis económica: su impacto económico”. Ekonomiaz, vol. 87, pp. 246-281.
TEJERO, A. (2017). “Permanencia en la pobreza laboral: la influencia de la pobreza pasada en la presente”. Revista Española de Investigaciones Sociológicas, nº 157, pp. 141-162.
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