Sustained growth in salary levels over generations

A recent report from the Spanish Ministry of Labour and Social Affairs shows a sustained growth in the average salary levels over employees’ working lives. Moreover, each generation has improved its salary levels in comparison with previous cohorts, although this improvement has slowed down among the youngest generations. On average, women always earn lower salaries than men, irrespective of generation. Furthermore, the salary inequalities between men and women increase with age, and this result is also apparent for all generations.

In December 2006, the Spanish Ministry of Labour and Social Affairs (Ministerio de Trabajo y Asuntos Sociales, MTAS) published a report (in Spanish, to buy) analysing data obtained from the statistical tool entitled ‘Continuous sample of working lives’, based on the Spanish Social Security Register. This instrument monitors variations in the employment careers of the generations born between 1910 and 1989, and the analysis includes a gender perspective.

From a methodological point of view, this tracking exercise is based on the average daily contribution in social security levies (a proxy indicator of salary) paid between 1980 and 2004 by the 835,000 employees included in the sample in 2004. The database encompasses employees or pensioners who have held a full-time contract at any time during this 1980–2004 time period. Inflation is taken into account so the study is based on ‘real’ salary increases.

Salary trends and generational differences

Overall, the analysis of the ‘Continuous sample of working lives’ shows a sustained growth in the average social security contribution base over Spanish employees’ working lives until they draw close to retirement, at which stage the contributions become stable. This is probably due to the system of upper limits that determines the contribution base.

Moreover, the data reveal a clear improvement in the real salary levels of each generation, defined here as all people born in the same decade. Thus, employees in any given period have a higher contribution base than those working in the previous decade. This result is mainly due to the increasing educational level of the generations. Nonetheless, this inter-generational salary gain has slowed down over time. For example, the average contribution base of employees born in the 1950s is 62.5% higher than the amount paid by those born in the 1920s; the comparison is made when both groups are aged 54 years. However, the difference has almost halved (to 35.5%) when comparing the contribution base of the currently oldest generation in respect of the present youngest generation, that is, those aged between 24 and 34 years old (see Figure).

Average daily contribution base of youngest generation compared with oldest generation (%)

Source: ‘Continuous sample of working lives’, Spanish Social Security Register

Average daily contribution base of youngest generation compared with oldest generation (%)

Among the reasons for this slower growth in real wages among the youngest generations are: the large numbers of new entrants into the labour market due to the ‘baby boom’ between 1946 and 1964; the general economic slowdown and structural changes experienced by the Spanish economy in the 1970s and 1980s; and more demanding working conditions.

Gender perspective

The overall finding that each generation receives a higher real salary than the previous generation – although this improvement is slowing down for the youngest cohorts – holds true irrespective of gender considerations. However, the data also reveal the existence of significant gender-related salary differences, always in favour of men; moreover, this result is found for all of the generations analysed. Nevertheless, the inequalities seem to be particularly significant among the oldest cohorts, while appearing to be more stable among the generation born in the 1960s, and subsequently increasing again for the youngest generations. The large intake of women, who were born during the late 1960s and 1970s, into the Spanish labour market and especially into low-paid job categories may explain this result.

The data also underline the disappointing fact that gender-related salary inequalities increase with age, irrespective of generation.

Arantza García de Lomana and Iñigo Isasi, IKEI