Spain’s Government is Split Over Plan to Boost Minimum Wage

(Bloomberg) -- Spain’s top government officials are split over whether to increase the minimum wage for 2021, Labor Ministry Yolanda Diaz said.

“It wouldn’t make sense” not to increase salaries for lower earners after agreeing to raise pay for pensioners and civil servants, Labor Ministry Yolanda Diaz said in an interview with Spanish TV-broadcaster La Sexta on Thursday. Diaz added that there is opposition within the government to approve an increase by year-end.

Diaz’s comments underline the growing tensions within Spain’s coalition government over efforts to bolster the economy. The Labor Ministry, controlled by the coalition’s junior partner, Unidas Podemos, is currently leading talks with business groups and unions with the aim of increasing the minimum salary from the current 950 euros ($1,160) per month, where it’s been since January.

But the Economy Ministry, controlled by Socialist Nadia Calvino, argues that it would add an unnecessary burden for employers as Spain battles with its worst economic crisis since the Civil War of the 1930s. Economy ministry officials also argue that minimum wage has already been increased significantly over the past two years.

The tensions between the two ministries also offer a window on the complexities faced by Prime Minister Pedro Sanchez as he runs Spain’s first coalition administration since the return of democracy in 1978. A formal proposal for raising the lowest wages may be presented to Sanchez’s cabinet by the end of the year, forcing the premier to decide which side he’s going to back.

The fight over the minimum wage is part of a broader fight between Diaz, a former Communist supporter and labor lawyer, and Calvino, who spent a significant part of her career as a technocrat in Brussels. Diaz is an advocate of eliminating a number of laws passed in the early 2010s by the previous conservative government. Calvino is opposed to a widespread dismantling of that framework.

The pro-market reforms made it easier to hire and fire workers during the economic crisis that ended in 2013 and is credited with helping drive the subsequent decline in unemployment, though its critics say it also made jobs more precarious.

Spain’s unemployment rate rose to 16% in the third quarter compared with 14% at the start of the year before the coronavirus pandemic forced the government to shutter significant parts of the economy. The jobless rate reached 27% in 2013.

The coalition agreement that Sanchez signed with Podemos’s Leader Pablo Iglesias in January stipulated that they would seek to scrap the labor reforms of the previous government and increase minimum wage to 1,200 euros a month by 2023.

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