Spain’s wage gap continues to widen



Despite the economic crisis, the salaries of Spain’s top executives are on the rise according to a study on wage developments between 2007 and 2013 conducted by Barcelona business school EADA and consultancy firm ICSA.

Average gross annual pay for senior managers rose to €80,330 last year, which is an increase of almost seven per cent.

Meanwhile, the rest of the workforce saw wages fall in 2013, to €36,522 in the case of middle management (a three per cent drop) and €21,307 for other employees (a 0.4 per cent drop).

“Those hardest hit by falling purchasing power over the last seven years have been employees, with a 4.7 per cent drop, and, above all, middle management, with an 8.6 per cent drop,” said EADA professor Jordi Costa.

Only the top bosses increased their purchasing power, with a 3.4 per cent rise above the cumulative rate of inflation during the same period.

This trend can be interpreted in different ways.

“The top executives are those who generate the most added value and are meeting objectives; they are therefore most likely to be the first in line for a pay rise when figures improve,” explains Costa.

It could be that the rest of the workers’ pay will follow the same trend. Pay inequalities could, however, keep on growing. According to Costa, “there would be no logic, neither economic nor social, in only increasing directors’ wages, as this would widen the wage gap.”

While waiting for the positive trend to reach the rest of the workforce, Costa believes that the best way forward would be to develop “variable pay systems based on performance and fringe benefits, such as training or involving workers in decision making”.

In addition, the number of millionaires in Spain rose by 47,000 during 2013, a rise of 13 per cent, according to the Credit Suisse Global Wealth Report 2013.

Work, a scarce resource

“The crisis has had a significant impact on working conditions, both for those who have managed to keep their jobs and those who were pushed out of the labour market and have not managed to make their way back in or have had to accept worse pay and conditions,” explains Carlos Martín Urriza, chief economist at the Confederación Sindical de Comisiones Obreras (CC.OO) trade union confederation.

The government is trying to inject optimism and is forecasting GDP growth of 0.7 per cent in 2014. But Martín Urriza warns: “Economic activity stopped contracting during the last two quarters of 2013, according to the National Statistics Institute (INE), but jobs are still being lost on a massive scale. So it’s clearly too early to say the crisis is over.”

There are, basically, two reasons for this, he explains: “Construction is not going to be part of the solution to the crisis and this sector is crucial for unskilled labour, and, secondly, credit is not flowing to companies and households, which limits the possibility of moving forward with investment plans.”

The number of households in which every economically active person was unemployed rose during the last quarter of 2013 by almost 25,000, reaching a total of 1.8 million, according to the Economically Active Population Survey (EPA) conducted by the INE. That is five times higher than in 2006.

“There is an urgent need to extend protection measures to tackle the rising poverty and lack of protection; unemployment benefits need to be extended to cover the lack of economic resources,” explains Toni Ferrer, Trade Union Action Secretary at the Unión General de Trabajadores (UGT) confederation.


The working poor

Having a job is no longer a guarantee of escaping poverty in the European Union.

The economic crisis has led to tougher working conditions and low wages, beyond Spanish borders.

In 2013, only half of Europeans at risk of poverty managed to find a way out of this situation after finding a job, reveals the Annual Report on Employment and Social Developments in Europe in 2013 published by the European Commission.

Warnings over the growing social vulnerability of workers are coming from the very political heart of Europe.

“Unfortunately we cannot say that having a job necessarily equates with a decent standard of living,” acknowledged the European Commissioner for Employment, Social Affairs and Inclusion, László Andor, during the presentation of the report at the end of January.

“A significant increase in the risk of poverty among the working age population is one of the most tangible social consequences of the economic crisis in Europe,” underlined Andor.

The European Commission is warning member states that unemployment should not be reduced at the expense of increasing precarious employment.

“We need to pay attention not only to job creation, but also to the quality of jobs, in order to achieve a sustainable recovery that will not only reduce unemployment but also poverty,” Andor insisted.