Minimum wage agreement introduces guarantee clause

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In December 2004, the Spanish government and social partners agreed to increase the national minimum wage by 4.5% in 2005, and to apply a wage guarantee clause whereby, if inflation exceeds the increase in the minimum wage, the latter will be adjusted upwards. However, the CEOE employers' confederation later withdrew its support, arguing that the wage guarantee clause is inflationary. The situation remained unresolved at the end of January 2005.

On 27 December 2004, the government, employers' organisations and trade unions reached an agreement on the revision of the statutory national minimum wage (Salario Mínimo Interprofesional, SMI), which was later approved by the cabinet. The SMI will be raised by 4.5% to EUR 512.90 per month in 2005, and will be progressively raised to EUR 600 by 2008, in line with the programme of the Socialist Party (Partido Socialista Obrero Español, PSOE) when it took office in April 2004. An important step in this direction has already been taken, because in July 2004 an extraordinary increase of 6.6% was applied to the SMI (ES0406204N), which affects about 1 million workers (see the table below).

The first and main new feature of the December agreement is that for the first time the purchasing power of those who receive the SMI will be protected by a wage guarantee clause, so if the agreed increase is lower than real inflation over the previous 12 months, the difference between the two amounts will be taken into account in subsequent increases. However, in the days following the agreement, the Spanish Confederation of Employers' Organisations (Confederación Española de Organizaciones Empresariales, CEOE) withdrew its support. It considers that the introduction of a wage guarantee clause will have an inflationary effect. In late January 2005, it is not yet clear whether this clause will be introduced or discarded. The Ministry of Labour (Ministerio de Trabajo) states that the employers and trade unions must reach an agreement, but that the next agreed increase will be applied.

Second, the agreement provides for reform of Article 27 of the Workers' Statute (Estatuto de los Trabajadores) with the aim of introducing a definition of the SMI as a minimum income linked to the average pay increase. At the last minute, CEOE also expressed its reluctance to accept this point. If a consensus is reached on this issue, it would follow the recommendations of the Council of Europe on interpretation of its European Social Charter, which are in favour of national minimum wages being about 60% of the average wage. However, the SMI is still far below the European average if this criterion is followed. Only Portugal lags behind Spain in this area.

Third, in order to compensate the employers for the possible impact of the new SMI on labour costs, the government has proposed to the social partners that a EUR 10 monthly reduction be applied to social security contributions in 2005. The trade unions expressed their opposition to this move, but agreed to include it in exchange for a greater consensus.

Finally, if the whole of a preliminary agreement reached on 27 September 2004 is accepted, a new 'public income indicator with multiple effects' (Indicador Público de Rentas con Efectos Múltiples) will replace the SMI as the reference for calculating benefits and subsidies in various social and labour spheres, such as scholarships, school meal subsidies or access to public housing. The reference amount for 2005 will be EUR 460.5 a month.

On 27 January 2005, the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO), the General Workers’ Confederation (Unión General de Trabajadores, UGT) and CEOE met again to unblock the bargaining process on the SMI and to resume negotiations to renew for 2005 the 'intersectoral agreement on collective bargaining' (Acuerdo Interconfederal de Negociación Colectiva), which has provided a framework for lower-level bargaining since 2002 (ES0412105F). The only thing that is certain at present is that the government will apply the agreed increase in the SMI in 2005, but everything else is still undecided.

Development of the national minimum wage, 1981-2005
Year Monthly amount in EUR Annual variation %
1981 153.98 12.5
1982 170.93 11.0
1983 193.29 13.1
1984 208.79 8.0
1985 223.40 7.0
1986 241.25 8.0
1987 253.33 5.0
1988 264.69 4.5
1989 280.56 6.0
1990 300.57 7.1
1991 320.04 6.5
1992 338.28 5.7
1993 351.77 4.0
1994 364.03 3.5
1995 376.83 3.5
1996 390.18 3.5
1997 400.50 2.6
1998 408.93 2.1
1999 416.32 1.8
2000 424.80 2.0
2001 433.45 2.0
2002 442.20 2.0
2003 451.00 2.0
2004 490.80 8.6
2005 512.90 4.5

Source: Ministry of Labour.

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