The Juan de Mariana Institute (IJM) warns that Spain is experiencing “salary equalization below” as the most common salary approaches the interprofessional minimum wage (SMI). According to its latest report, the gap between the modal salary and the SMI has gone from 40% to 3% in the period 2018-2023, a compression that the study center attributes to the stagnation of intermediate salaries compared to a minimum that has risen “strongly” in real terms.
The document places the phenomenon in a context of sustained increases in the SMI. In real terms, the legal minimum increased by 32% between 2009 and 2023, of which 26% was concentrated since 2018. The IJM describes as “simplistic” the story that raising the SMI is a mere matter of social justice without collateral effects, and maintains that, “the more the SMI rises, the less the wages of the rest of the workers grow.”
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The convergence between both magnitudes, he adds, can be seen both in percentage and in constant euros. The modal salary fell in 2023 to 13,800 real euros, while the SMI stood at around 13,370 euros, reducing to about 400 euros what years ago exceeded 8,000. In relative terms, the 40% gap narrowed to around 3%.
The real salary goes down, the SMI goes up
If we look at it by territory, we do not realize that it is not homogeneous, since the SMI exceeds 60% of the average salary in 42 of the 50 provinces and exceeds 75% in 34, with maximums in Ávila (78.7%), Zamora (77.3%) and Badajoz (75.8%). At the regional level, Extremadura has the highest ratio (72.8%). The report highlights that the pressure is concentrated in labor-intensive sectors (hospitality, commerce, cleaning, auxiliary services), more present in lower-income areas.
In terms of employment, the IJM recovers the calculations of the Bank of Spain that estimate up to 174,000 jobs destroyed by the 22% rise in the SMI in 2019. Broadening the horizon, the institute estimates a cumulative loss of 210,000 jobs between 2019 and 2023, with a projection of 270,000 throughout 2024. In parallel, CEPYME explains that the increase in labor costs “has caused smaller companies to generate 350,000 fewer jobs.”
The report also points to effects on social mobility and incentives for professional progress when the SMI approaches the most frequent salary, since “the salary reward for progress decreases”, the informal economy is “promoted” and the SMI stops acting as a lever for improvement and becomes an “impoverishing ceiling.”
Spain with the worst salary evolution of the OECD countries
In its diagnosis, the IJM sees “flattening of the salary structure at the base” and recalls that Spain is among the OECD countries with the worst evolution of real salaries in the last three decades. In his opinion, salary policy has lost its anchorage in productivity and has become subject to political guidelines. For this reason, he calls for reforms that reward productivity and competition to “return salary capacity to workers.”
The work is based on deflated series (constant euros) and on the cross-relation of sources such as INE, Bank of Spain and IJM’s own estimates.
The Executive has defended on other occasions the role of the SMI to raise low incomes and reduce inequality, while the academic literature offers heterogeneous results depending on methodology and context. The IJM, on the other hand, insists that Spain needs “pro-productivity reforms” instead of new increases “by decree.”