Inflation has persisted worldwide, eroding purchasing power by about 5 percent in Spain compared to pre-pandemic levels. Across the globe, workers have felt the squeeze as prices rise faster than wages. A recent report from the International Labour Organization highlights a rare trend: real wages are shrinking for many workers for the first time in the 21st century, a warning that persistent price increases could undermine consumer demand and slow economic activity. The result is a risk of slower growth and potential recessions in several regions.
Prices keep climbing while wages fail to catch up. This dynamic hurts daily life for many households, and the early 2022 job picture in Spain showed a different rhythm for many workers, who found themselves nearly 5 percent poorer compared to the start of the pandemic. Figures from OECD, the consumer price index, and collective bargaining agreements corroborate this trend. The ILO adds its evidence, underscoring that workers worldwide are absorbing the cost of inflation through reduced purchasing power.
The inflationary spiral does not hit everyone equally. Spain stands out as one of the hardest hit among advanced economies in the pre and post pandemic period. On average, salaries across the G20 declined by 2.2 percent, about half the drop seen in Spain. By contrast, payrolls in developing countries continued to rise slightly, but the increase was only a fraction of what existed before the pandemic.
One key takeaway from the ILO report is that fighting the deterioration of real wages could help lessen the likelihood or severity of recessions across countries and regions. Analysts note that wage dynamics play a central role in domestic demand and overall economic resilience. In 2023, Spain faced a slower pace of growth, and government and educational institutions trimmed expectations for the year ahead. Labor unions argue that prolonged wage declines threaten domestic consumption and could impede GDP growth, aligning with ILO findings.
Minimum wage to be determined in December
The debate over setting a new monthly minimum wage for 2023 began in earnest, with a December decision on the horizon. The government plans to publish an expert assessment that will outline the range for the forthcoming increase. Initially, the proposal anticipated an uplift close to 1,012 to 1,047 euros gross per month, paid in 14 installments. Given current inflation pressures, the government is expected to propose a higher figure, in consultation with the Department of Labor. Unions are advocating for a target around 1,100 euros, while employers have yet to commit to a final number.
Raising the minimum wage to a level that helps counter rising costs is among the ILO’s policy recommendations to support households most affected by inflation. The ILO argues that a well-timed adjustment to minimum wage rates can bolster purchasing power and stabilize consumption, potentially dampening households’ financial stress. In addition, targeted bonuses for families with lower incomes or without earned income are highlighted as effective measures. The government has already approved 200 euro bonuses in response to needs. EPA data indicate that nearly a million Spain households face unemployment across all members, underscoring the breadth of the challenge.
Overall, the inflationary surge has hit the lowest-income households hardest, with price levels rising about 15 percent for the poorest families, versus around 13.5 percent for wealthier households. This unequal impact has created widespread uncertainty among workers, and leading voices warn that a slower recovery after the pandemic could be jeopardized if wage dynamics do not keep pace with prices.