The government has completed the plan to raise the interprofessional minimum wage (SMI) for 2023. Experts appointed by the Executive presented recommendations proposing a wage base increase of at least 4.6% and up to 8.2% from the current €1,000 gross (in 14 payments). Traditionally, final SMI figures are approved at the last Council of Ministers of the year, after consultations with employers and unions. The change would take effect from 1 January, with companies that have payrolls for that month updating the amounts. The Ministry of Labor still needs to consult social institutions and present the revaluation to the next Cabinet. The final decision remains in the hands of Vice-President Yolanda Díaz, who is expected to announce this Wednesday and indicate whether another mid-year adjustment will occur if inflation rises again.
Work proposes to raise the minimum wage to a maximum of 1,082 euros
How many workers and which sectors are affected?
The minimum wage, by definition, is the salary earned by the lowest paid workers. It is a mandatory benchmark aimed at reducing working poverty, defined as not having enough money to sustain a basic standard of living despite being employed. The prevailing view in related literature is that working poverty mainly stems from insufficient working hours rather than wages alone. In other words, more people are poor because they work fewer hours and want to work more, not because wages are inherently high enough to cover living costs.
Imagery of typical minimum wage earners shows a younger, migrant woman in the service sector or a small rural business. About 10% of the workforce earns the minimum wage, roughly two million people across Spain.
Will raising the minimum wage destroy employment?
Economists have long debated whether increasing the inter-occupational minimum wage leads to job losses. The Nobel laureate David Card demonstrated that raising the minimum wage does not always reduce employment; in some settings it can even spur hiring in specific activities. Card emphasized that the impact depends on local conditions and must be analyzed context by context, rather than applying a one-size-fits-all conclusion. The central idea is that the effects hinge on the particular labor market and the characteristics of the workers affected.
The core takeaway is that the decision to raise the minimum wage should be evaluated case by case, focusing on how hours, job availability, and earnings interact in a given region or sector. In Spain, studies on recent revaluations are diverse and often yield mixed results. Some analyses suggest increases may briefly slow job creation, while others show limited or no sustained negative effects on overall employment. The Bank of Spain noted that a jump from 735 euros to 900 euros in 2019 coincided with a short-term pause in job creation, followed by a rebound in payroll growth among employed workers.
Institutes like the Iseak Foundation, in a study commissioned by the Ministry of Labor, found that the initial period after a wage increase showed little to no employment impact, with potential adverse effects emerging gradually over time. In aggregate terms, the labor market did not deteriorate, and the number of active workers remained high, indicating resilience in the economy even as wages rose.
A measure that promotes equality?
The relationship between equality and employment is central to these debates. Analyses consistently show that government-driven wage increases help raise income for households at the lower end of the distribution and reduce wage inequality. This, in turn, can contribute to a broader reduction in poverty levels. Some observers argue that wage hikes do not automatically translate into reduced hours for workers, suggesting a limited direct impact on employment practices in many firms.
Cross-country research indicates that increases in the minimum wage bolster earnings for low-income families and narrow the gaps between the highest and lowest earners. The overall effect on poverty and inequality tends to be positive when wage gains are sustained and accompanied by stable employment opportunities, even if individual sectors experience short-term adjustments.
Does the entire government agree on the minimum wage?
Analyses released by experts appointed by the executive show a range of 4.6% to 8.2% for the potential increase, moving from 1,000 euros gross per month (in 14 payments) to a range of about 1,046 to 1,082 euros. A separate memo, requested by the Ministry of Economy, suggested a 3% increase up to 1,030 euros. The final decision and any split between ministries will unfold in the coming days, with the public awaiting how the different perspectives align before formal confirmation.
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