Minimum wage increase in Spain will cause significant job losses

by Lorraine Williamson
job losses due to minimum wage increase

MADRID – According to employers´organisation, Cepyme, the imminent increase in the minimum wage in Spain (SMI) will mean many job losses. This will mainly affect employees in the hospitality and retail sectors as well as young and low-skilled workers. 

Like Cepyme, other employers’ organisations have also expressed their concerns about the consequences of an increase in SMI. A monthly increase of €19 this year would bring the monthly salary to €969. And with the planned addition to €1000 next year, Cepyme expects between 60,000 – 130,000 job losses by 2023. 

SMI 60% of average income by 2023 

According to a study conducted by Cepyme together with Randstad Research, existing jobs be lost. But also, fewer new jobs will be created as a result of the increase. The study is based on a salary increase of between €12-€19. This is the margin for the increase that experts have advised the government. The government’s objective is to have the SMI equal to 60% of the average income in Spain by 2023 (at the end of the current reign) with a progressive wage increase. 

Increase is 5 to 10 higher than in Germany or France 

If approval is given for €19 this year, that means an increase of 2% of the current monthly minimum wage of €950. This would put Spain at number 3 (after Romania and Lithuania) of the European countries with the largest increase (+47.7%) in the minimum wage in the period 2016-2021. The increase percentage is even 5 to 10 times higher than the average in Germany or France. 

Next year, another €31 will be added to reach the intended €1000. In two years’ time, the SMI will increase by €50. This is an increase of 5.3% compared to the current minimum wage. Compared to 2016, this is an increase of more than 52.6%. 

Unfavourable timing for increasing SMI 

Cepyme underlines once again that the increase in the SMI comes at a crucial time for the Spanish economy. After all, employment has not yet returned to its previous level and registered unemployment is still 1.5% higher than before the start of the pandemic. The employers’ organisation, therefore, urges the government to take into account the current economic situation, employment, productivity, and the current price index when determining the new monthly amount. 

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