Wages are rising and have been close to outpacing inflation in recent years.

The sharp rise in inflation at the end of 2021 led to a decline in citizens' purchasing power. This was the result of bottlenecks in the post-pandemic economic reopening process that spanned all of 2022 and most of 2023 and was due to higher energy prices as a result of the Russian invasion of Ukraine. Although the rise in the consumer price index was offset by wage increases, workers' purchasing power has not yet regained all the ground it lost at the end of last year. Various reports and data published in recent months suggest that this goal can be achieved during the year itself.

The last document to support this thesis is the economic situation report published by the Spanish Ministry of Economy last August. Specifically, the report states that the data on wage costs and inflation for the first quarter of the year indicate a full recovery of purchasing power in the autonomous community, a process that began last year. As for the situation in Spain as a whole, the document published by the Spanish government avoids drawing conclusions about its evolution.

The report notes that “labor and salary costs in Catalonia increased by 3.8% and 4.2% respectively in the first quarter of the year, rising more than inflation, reflecting the ongoing recovery in purchasing power.” When looking at the cost of hourly wages, the increase is even much higher, at 7.3%. The document points out that salary increases will be above the consumer price index from the first quarter of 2023.

If we take 2019 as a reference, the last year before the pandemic and the rise in inflation, we can see that in 2021 inflation exceeded the increase in wages in Catalonia and in 2022 it increased significantly and was slightly higher than in 2023. In the case of Spain as a whole, the evolution follows the same path, although the gap between the wage bill and the consumer price index is somewhat larger. Thus, the data provided in the Secretariat's report are not yet sufficient to confirm the recovery of purchasing power, but they indicate that this will happen soon.

By July, there had been a 3% increase in agreements, coinciding with a decline in inflation.

There are other indicators that suggest a turnaround, such as the evolution of collective agreements in Spain. Data from the Ministry of Labor updated in July indicate a cumulative increase in salaries of 2.99% in the sector and 2.86% in the corporate sector. On the other hand, inflation reached 2.8% in July, six tenths less than in June, due to the weakening of oil, fruit and electricity prices. The coming months will be crucial to confirm the slowdown in inflation.

The figures of the agreement are in line with the collective agreement between the Confederación de Trabajadores (AENC). The agreement between the CC.OO. CGT and EDEC unions recommends a 3% salary increase for this year and for 2025, with a salary review clause that could provide additional increases of up to 1% for each of the contract years (2023-2025) in the event of a deviation from inflation. “The figures of the agreement are usually lower than the real figures that workers see, since there are many workers who are not covered by the agreement or are above it,” says Joan Ramón Rovira, head of the Studies Office of the Barcelona Chamber of Commerce.

Another factor to take into account, according to Josep Oliver, professor emeritus of applied economics at the Autonomous University of Barcelona (UAB), is that the recovery of purchasing power is not the same for the whole of society. “In the basket of a modest family, the share of food can be up to 40%, while in the middle class it can be up to 20%. The evolution of consumer prices has very different effects depending on the income of each family unit.”

The increase in hourly wages of 7.3 percent in Catalonia and 7.2 percent in Spain as a whole also has a negative side in the economists' analysis. “There is a risk that these wage increases will come at the expense of companies' productivity,” adds Oliver. “These 7 percent increases are not sustainable in the long term,” says Rovira.

The Spanish government says that wage cost increases have exceeded the consumer price index since 2023.

Not all expectations
It indicates an imminent recovery. Recently, the Organisation for Economic Co-operation and Development (OECD) published the report Employment forecast 2024, This puts the focus on
The fact that Spain is one of the industrialized countries where real wages have fallen the most since the beginning of the pandemic.
In this sense, the document makes it clear that despite the above-mentioned wage increase,
Inflation in 2023 and early 2024, this
The increases did not help to offset the loss.
Purchasing power of the years
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Specifically, salaries remained 2.5 percent lower in the first quarter of 2024 compared to the fourth quarter of 2019, the document says. The data contrasts with sharp increases in the minimum wage for skilled workers of 26 percent, which benefited the most precariously employed.