X-ray of inequality in Spain: the gap between classes goes beyond the CPI

Traveling for a vacation, buying a car or coming to the end of the month worries the pockets of millions of families in Spain, who risk galloping inflation and an economic crisis that will worsen over the next few years. Consumer Price Index (CPI) reached 9% in September. For more than a year, costs have not stopped the spikes due to the supply crisis and the international context. The fact that the shopping cart is 9% more expensive today than a year ago has serious consequences for citizensespecially for the most vulnerable layers that cannot afford unforeseen expenses.

For decades, inequality and poverty have plagued Spanish society, but the financial crisis fifteen years ago was a blow to the accounts of most citizens. “There are many households that barely survived the great crisis of 2008 when the pandemic hit.”, explains Luis Ayala, professor of Applied Economics at UNED and co-author of the latest Foessa report. Inequality levels in Spain have historically been higher than in other countries. it affects the response capacity of our environment and that of a large segment of the population when times of weakness come. “The problem of inequality stems from three factors: an uncompetitive economic model that relies on low wages to survive; a unemployment rate structurally longer.and lower redistribution capacity of our public policies”, says the expert.

In line with this thought, Joaquín Maudos, deputy director of IVIE, The main reason for the increase in inequality is due to Spain’s low productivity.: “Efficiency is one of the main sources of economic growth, therefore it determines the level of prosperity a country can desire.” According to the researcher, our country has lower productivity growth compared to its competitors due to the low investment in R&D and the structure of the labor market. “This explains a significant portion of the per capita income level relative to other countries around us.” According to Eurostat, Spain’s GDP per capita, the main indicator of economic growth, is 18.5% below the eurozone average.

The economics literature shows that periods of economic growth and job creation lead to reductions in inequality levels. However, after the 2008 crisis, the inequality levels in the income distribution measured by the Gini coefficient in Spain did not stop increasing and only started to decrease as of 2017. With the impact of the epidemic, economic inequality has increased again. According to the experts consulted in our country, we are witnessing an “anomaly”.: In times of job disruption, such as the 2008 crisis, productivity and inequality levels increase. Once the crisis is over and employment is up, inequality levels are not falling at the same rate. “Reducing inequality is very difficult if you don’t create jobs, but that alone is not enough,” Ayala says. “You need a quality job: stable, not well paid and insecure”.

fees are too low

Employment data from the National Institute of Statistics (INE) give a bad picture of the labor market. According to the Active Population Survey, the provisional rate is 22.5%. Latter, Half of Spaniards earn less than 21,000 euros gross per year, according to the statistics agency. Finally, it is an indication that the labor market is precarious: 10% of the workforce want to work more hours but are unable to work, meaning that a significant number of workers do not earn enough or their current employment limits their opportunities for professional development.

The evolution of salaries in Spain is insufficient to support the rising costs of the economy, leading to a loss of purchasing power for millions of families in key sectors of the local economy. A joint study by InfoJobs and Fotocasa revealed that: while monthly salary Average job offers have increased by 6% and house prices for sale have increased by 16% over the last five years.. Mónica Pérez, Director of Communications and Studies at InfoJobs, underlines that the income evolution between 2017 and 2020 has been slowed by the pandemic: this situation, which may face the difficult economic situation caused by the energy crisis and lack of supply, also seriously affects the purchasing power of workers in the face of rising inflation.” They warn from Fotocasa that the problem could get worse: “In the context of illegal inflation, if they lose their purchasing power due to the rise in property prices, the gap may become even greater by raising the price of real estate and lowering the disposable income of households in the CPI”, says María Matos, Director of Studies and spokesperson for the real estate portal.

Poverty is on the rise in Spain

The high cost of living and the inequality gap between the population, one-third of citizens are currently unable to afford unforeseen expenses, according to Living Conditions Survey data. “We see that the expenses that go up the most are precisely those that weigh more on lower-income families—explains Luis Ayala. Food, supplies, shelter, etc. they represent a core cost for the poorest 10% of citizens”.

Lack of income causes There is an increasing shortage of supplies among the Spaniards. A third of citizens cannot go on vacation, one in seven cannot pay for heating or air conditioning to maintain adequate temperature in their homes, and 12.6% experience delays in their housing payments.

A remarkable fact is that 6.5% of the population cannot buy computers without sacrificing their finances. In an era of digitization, where more and more activities are carried out over the web, from administrative procedures or online purchasing to online education or remote working, the inability to afford the acquisition of essential electronic devices can increase social divide. “The pandemic and teleworking have shown us even more of the gap in the labor market: a segment of workers with higher qualifications, more stable and higher salaries, and another group dependent on face-to-face jobs that closed during the pandemic. ; more precarious and more vulnerable,” Ayala says.

“Economic growth should be inclusive, that is, not let anyone down,” says Joaquín Maudos. However, the latest edition of the Foessa report, a reference in social research on poverty and integration in Spain, points out: Less than half of households are not affected by some form of social exclusion. This phenomenon measures different areas of life: employment, education, political participation, housing, etc. As fewer indicators are met, the degree of household exclusion increases. The report estimates that Six million people in Spain are in a state of serious social exclusionThis represents a 50% increase compared to 2018. On the other hand, INE indicates that more than a quarter of the population (27.8%) is at risk of poverty, compared to 21.5% four years ago.

“Inequality is multidimensional and there are fields that feed off each other,” says Luis Ayala. “For young people, for example, it comes together with a precarious labor market where their first wages are lower than they were decades ago and rent prices are at historically high levels.” According to Fotocasa, between 2015 and 2021, cost hire Increased by 41% in Spain and the average rental housing price was 10.2 Euro/m2 at the end of 2021. The figures show that young people suffer from very high levels of vulnerability: low income, problems with self-emancipation, high housing costs, job instability…”.

The role of the state

While the relatively inefficient economic model and labor market instability are important components in explaining the rise in inequality and poverty, there is a third factor to consider: The role of the welfare state in redistributing wealth and balancing the market. “The level of inequality before taxes and benefits in Spain is not much different from other European countries,” explains Ayala. However, the Applied Economics professor points out that after the government’s intervention, the disposable income figures are higher than in other countries. “Our inequality is not in line with the income levels we recorded: we have a much weaker redistribution policy than in other countries,” he tells the expert.

Joaquín Maudos believes that taxation plays a crucial role in preventing “over-concentration of income and wealth” in a small number of people. “In Spain, in recent years, income inequality has increased; benefits outweigh wages”. This is seen when analyzing the country’s taxation relative to other States: the OECD points out that Spain’s tax burden is significantly lower than that of the rest of the European Union.

Again, experts think increasing tax pressure will not be enough to reduce inequality in Spain. “There is no room for general tax cuts or increases in public spending; To begin with, because this highlights the problem of inflation. Joaquín Maudos, not generalist-populist, should focus on the vulnerable groups that suffer the most from inflation with very selective measures.” Luis Ayala believes the key is to combine actions to reduce inequality: “One sectoral policy is not enough, one benefit is not enough. We have to fight inequality on multiple fronts.”

Experts agree that strategy must be shared to mitigate the effects of inequality and promote healthy growth that reaches all social classes. They point out some keys for this: more and better investment to get a more competitive marketA reform of the financial structure and public policies to reduce unemployment by promoting quality jobs and reduce the social deficit to mitigate the impact of successive recessions. “That’s the role of the state: to prevent the crisis from targeting the most vulnerable,” says Maudos.

Source: Informacion

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