Spanish workers have been poorer since the beginning of the year. On average, its purchasing power has fallen by 3.5% in the first half of 2022, according to estimates by the ILO (International Labor Organization). The main cause is that runaway inflation has not been able to be offset by an increase in wages.
Despite the fact that households have less purchasing power, consumption grew by 1.5% year-on-year in the third quarter. Why?
"Because even if purchasing power falls, more and more workers are joining the labor market," answers Josep Oliver, a professor at the UAB. To understand it, the economist asks to separate the micro data (families have less spending capacity individually) from the macro data (aggregate demand is higher because there are more people employed). Almost half a million jobs have been created in the last year.
Raymond Torres, director of the economic situation at Funcas, introduces the saving variable. In his opinion, household consumption is maintained thanks to the financial cushion they hold. “In economic analysis, it is very difficult to predict when the loss of purchasing power affects consumption because families stop using their savings,” he reflects. That's when the economy suffers. Now the arrival of Christmas can mask consumption again, but the economists consulted agree that this impoverishment of society ends up emerging.
Oliver points out that consumption and, by extension, the economy, is also resisting thanks to the group of retirees who maintain their purchasing and purchasing power. Last week it was confirmed that they will benefit from a rise of almost 8.5% for next year.
It is a percentage that more than triples the average increase in workers. The data for the negotiation of agreements show that the average increase agreed in agreements up to the month of November is 2.6%.
The good tone of the labor market since the covid pandemic is not enough to bring the level of employment in Spain closer to the EU average. Torres calculates that it would be necessary for the Spanish economy to create 1.7 million jobs for the employment rate in the 20 to 65 age group to go from the current 70% to 74% of the EU average.
Torres believes that the Spanish labor market suffers from some endemic ills such as youth unemployment or long-term unemployment that are detrimental to improving the employment rate.
In its latest report on wages, the OIT warned that the monetary tightening undertaken by the European Central Bank (ECB) will curb inflation, but will cause negative consequences for the most vulnerable households in Spain: "the tighter monetary policy could lead to adverse results for certain segments of the population and cause a period of recession. Households, for example, may find it more difficult to repay their debts, including mortgages.
In the first half of 2022, global wages fell by 0.9% in real terms. It is the first decline recorded by the ILO since the report was produced in 2008. In the European Union, wages fell by 2.4% in the first half of the year and by 3.5% in Spain. The report also highlights that price variations between 2021 and 2022 produced a 15% increase in the cost of living for households with the lowest wages, while for the highest incomes this increase is 13%.
