Minimum wage, a measure in favour of a social contract

Report

July 2022

Rafael Granell, Amadeo Fuenmayor and Teresa Savall, EVALPUB;

Projecte seleccionat en la Convocatòria per donar suport a projectes de recerca sobre desigualtat social (LL2020_5)

A minimum wage is the minimum amount that a salaried worker may receive as remuneration for his or her work. It has become a key element over time to guarantee the financial self-sufficiency of workers regardless of their gender or age. In terms of Spain’s minimum interprofessional wage (SMI), this increased by 29.1% to 950 euros per month in the period 2019-2020. This has been the highest increase over the past 20 years and places Spain above the European average. The increase has had a major positive impact on social welfare by targeting the most precarious workers. Nonetheless, further increases will have to be assessed in terms of their effects on the labour market, especially in the aftermath of covid-19.

Key points

1
The rise of Spain’s SMI in 2019 and 2020 has been the highest over the past twenty years, with a combined increase of close to 30%.
2
Thanks to these increases, Spain now has an SMI that is higher than the European average, both in terms of purchasing power parity and in terms of the average wage.
3
The increase has benefitted 1,631,000 salaried workers, 9.6% of the total. The wage increase was equivalent to an increase in disposable income of 77 euros per month for these workers.

4
The groups benefitting most in terms of wages have been employed persons without higher education. According to sector, the increase has had a particular impact on agriculture, hospitality and commerce. According to demographic profile, foreigners, young people and women have benefited the most.
5
The increase has reduced wage gaps by gender, country of origin or age, as well as also reducing wage inequality among employed persons and disposable income inequality among Spanish households.
6
Spain’s new SMI has reduced monetary poverty among households, particularly impacting young people. More than 250,000 people, including 121,000 under 30, have been lifted out of poverty.

Benefits from the SMI increase are unequal