Spain shows its own Iberian exception when balancing business costs and labor costs amid inflation. While profit sharing among business owners climbs to three times the eurozone average in Spain, fees are rising by about half that rate. A report released by UGT this week confirms that workers’ purchasing power is 6.4% lower today than before the 2008 crisis, and the current price crisis has added new pressure on income from business in the total wealth produced and distributed within the Spanish economy. The report notes that the most common net monthly salary in Spain is 1,100 euros, a figure that should not be confused with the average, which is skewed by very high and very low incomes.
The UGT study provides a snapshot of present-day salaries in Spain, contrasts them with trends across Europe, and compares these with how business accounts have evolved. According to the union, the overall result favors companies rather than workers. Dividend payments to shareholders nearly doubled in the second quarter of the year relative to the same period last year, rising by 97.7 percent. This growth outpaces the European average, which stands at 28.7 percent. In contrast, dividend growth was more modest in France and Germany, at 32.7 percent and 36.3 percent respectively.
Companies are now distributing profits earned after the exit from the Covid-19 crisis. Managers expected stronger economic momentum than what was realized, with the pandemic triggering a price spiral in many economies. That dynamic is evident across major European economies, but Spain shows a different trajectory. Business margins, defined as the residual after subtracting production costs from sales, have risen in Spain while contracting in France, Italy, Germany, and the Netherlands. In Spain, margins increased by 7.9% in the first half of the year, compared with a 3.1% decline across the euro area as a whole, according to the UGT analysis based on Eurostat data.
The document highlights that most companies have improved their accounts more than wages have risen. Fernando Luján, deputy secretary general of UGT, stated that 85% of inflation is driven by corporate profits. Wages are rising across Europe, with average increases above 4%. It is seen as unacceptable that the fourth-largest economy in Europe is among the countries with the smallest wage growth. Labor cost per actual hour worked rose by 2% in Spain, versus an average of 4.1% for the euro area.
UGT calls to reopen the salary contract
The UGT also references European Commission estimates that real salary per employee in Spain will fall by 3.1% in 2022, a figure that places Spain among the seven worst in the eurozone. When this decline coincides with an expected 2.7% rise in corporate profits forecast by Brussels, the result is a wider gap between real wages and profits in Spain compared with the rest of Europe.
Armed with this data, the union argues for restarting negotiations with employers to establish a salary agreement that will guide rises in the coming years. The union advocates a refreshed Employment and Collective Bargaining Agreement as a tool to instill confidence and provide structure to collective bargaining. The message is clear that business organizations cannot continue to be stingy while inflation weighs on households and the broader economy.