Unions call for revision of minimum wage in light of high inflation

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In July 2000, Spanish trade unions demanded the immediate revision of the national minimum wage (SMI) to adapt it to the difference between forecast and real inflation. The SMI was increased by 2% for 2000, but inflation seems sure to exceed this figure.

In late July 2000, the general secretaries of the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO) and the General Workers' Confederation (Unión General de Trabajadores, UGT) met the Prime Minister to evaluate the process of social dialogue that started recently (ES0006194F). The trade unions demanded the immediate revision of the national minimum wage (salario mínimo interprofesional, SMI) to adapt it to the difference between real inflation and the forecasts. The SMI for 2000 was increased by 2% (the inflation forecast) but, according to the latest figures gathered in July, the accumulated inflation rate was already 2.4%.

The SMI is of great importance in Spain because it affects around a million people: these are workers who are not covered by a collective agreement or who have a wage established by collective agreement but indexed to the SMI, and those who receive unemployment benefit or other income that is indexed to the SMI.

The Workers' Statute regulates the procedure for setting and revising the SMI. According to the rules that have been in force since 1994, the government should set the SMI annually after consultation with the social partners, bearing in mind the inflation forecast and other socio-economic indicators (the general economic situation, average productivity and the increase in the contribution of labour to the national income). The Statute also obliges the government to revise the SMI every six months if inflation is higher than the forecasts, although the mechanism for doing this is not specified.

The unions have been very critical of the application of this procedure and the development of the SMI in the past few years (ES9801240N). They consider that in practice the government sets the minimum wage unilaterally, using exclusively the official inflation forecasts and not the other indicators, and that so far the level has never been revised in cases of difference between forecast and actual inflation. The result has been a regressive development of the SMI that widens the gap between workers in precarious employment and the rest. Since 1994, the SMI has been losing purchasing power (only in 1997 and 1998 was the real inflation rate lower than the forecasts) and falling further behind the average wage (by around five percentage points between 1994 and 1999). The loss of purchasing power was particularly great in 1999, when the accumulated inflation rate was 2.9% but the SMI was increased by only 1.8%. The unions feel that this negative evolution is even more serious if one considers that the minimum wage in Spain is one of the lowest among the European Union countries with such a system (TN0002401U) (it is higher only than that of Greece and Portugal) and represents around 45% of the average net wage, far below the 60% recommended by the committee of independent experts for the implementation of the Council of Europe's European Social Charter.

The unions' first demand is that the government should carry out the mandate of revising the SMI when inflation is higher than forecast, as laid down in the Worker' Statute: they consider that the law is very clear on this and that the lack of a specific mechanism should not be used as an excuse for doing nothing. They propose that the SMI for 2000 should be revised immediately and that a permanent mechanism should be set up for automatica revision in order to make the process more transparent and to eliminate uncertainty, as has already been done with pensions. The unions also feel that the minimum wage should be increased progressively and that, in addition to the inflation forecasts, the government should use other socio-economic indicators to set the SMI annually, as is laid down in the Worker' Statute.