Spain: Latest working life developments Q4 2018

An increase in the minimum wage, a new plan to tackle youth unemployment and a significant wage increase for public sector employees are the main topics of interest in this article. This country update reports on the latest developments in working life in Spain in the fourth quarter of 2018.

Minimum wage increase approved for 2019

In a meeting of the Council of Ministers held in Barcelona on 21 December, the executive approved a 22.3% increase in the minimum wage as of 2019, from €735.9 to €900 per month or €12,600 per year (based on 14 monthly payments). This is the largest increase in the minimum wage since 1977.

The increase was negotiated between the Socialist government and the left-wing party Podemos as part of their agreement for the 2019 budget. The government justified the move in terms of needing to converge with the EU average minimum wage in the context of economic growth. It will also serve to improve the general condition of the economy, while helping to prevent in-work poverty and encouraging a more dynamic wage growth. More specifically, this increase is in line with recommendations made by the European Committee of Social Rights to set the minimum wage at 60% of the median wage in the economy and will contribute to meeting the objectives of the 2030 Agenda. The government also expects this increase to have a positive impact on domestic demand and lead to an increase in tax revenues through social security contributions.

Contrary to standard practice, the increase in the minimum wage has been set unilaterally, without negotiations with trade unions and employer organisations, although they were consulted about it. While trade unions have welcomed it, employer organisations have been very critical of the increase as they feel it will weaken jobs and become an obstacle for job creation.

Emergency action plan to tackle youth unemployment

The Emergency Plan for Youth Employment 2019–2021 was approved by the Council of Ministers in early December after an agreement had been reached with trade unions and employer organisations. This was one of the issues in the social dialogue agenda that had been agreed in July 2017. Trade unions and the government reached an understanding in late November and employers joined the agreement a few days later.

The objective of the agreement is to promote the employment of young people through a plan reflecting the commitment of social partners and the government to this issue. The most important of the 50 measures contained in the plan involves the hiring of 3,000 additional job counsellors. These counsellors will be responsible for coaching young unemployed people on the best ways to find employment. The counsellors will not be appointed permanently, but will be hired on fixed-term contracts for a maximum of 18 months. However, the current executive has already indicated its preference for the role of these counsellors to continue beyond the 18-month period. Once the programme has ended, the results will be evaluated and a decision on the future of the job counsellors will be taken by the relevant institution in each regional government.

Significant wage hike for public sector employees

Public sector employees will benefit from a 2.25% wage increase in 2019 approved by the Council of Ministers in December.. This is the largest increase since 2008, when a 3.5% increase was agreed. The increase is part of the three-year agreement signed in March 2018 by the most representative trade unions in the public sector and the government, which established a wage increase of up to 8.79% for the 2018–2020 period.

The increase for 2019 includes a fixed element of 2.25% and a variable additional element of up to 0.25% depending on GDP growth in 2019. This will be reviewed at the end of June and will apply only to the second half of the year. This will be the third consecutive year that public sector employees have benefited from wage increases, after six years of wage freezes and real wage cuts following the 2008 economic crisis.

Commentary

Social dialogue remains strong and has contributed to the delivery of several agreements, including the plan for youth employment. Negotiations are still ongoing around several issues, including the revision of some aspects of the 2012 labour market reforms such as ‘ultra-activity’ or the predominance of company-level over sector-level agreements, where the positions of trade unions and employer organisations are more distant. The improvement in labour market conditions provides a favourable context for social dialogue, but the first signs of a slowdown have started to appear in the economy and the labour market.

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