Spain, Unions Agree to Increase Minimum Wage

(Bloomberg) -- The Spanish government has agreed to hike the minimum wage for the second time in less than two years, bowing to demands from its junior partner and unions despite resistance from business groups.

Spain’s Labor Ministry, controlled by leftist party Unidas Podemos, agreed with unions to raise the wage by 15 euros per month, or about 1.6%, according to a statement from the ministry late Thursday. The increase is applicable as of Sept. 1. The administration aims to increase it further, to as much as 1,049 euros ($1,236) per month by 2023. 

Top business groups didn’t support the agreement, warning that raising wages now could scuttle the recovery of an economy that suffered the deepest contraction in the euro area last year.

The timing of the hike had put Prime Minister Pedro Sanchez’s Socialist party at odds with Podemos, which had pushed for a second increase in late 2020. Back then, Socialist Economy Minister, Nadia Calvino, had called for caution in raising wages to avoid hurting employers struggling amid the Covid-19 pandemic.  

A stronger rebound and quickening inflation since has eased resistance from Calvino, who said rising employment now allows for a higher minimum wage needed also to tackle a growing wealth gap. The Spanish economy has bounced back and is expected to grow this year at its fastest pace in over four decades.

Although a wage hike could help ease inequality it may also have negative side effects on sectors closely tied to the minimum wage such as services, Bank of Spain Governor, Pablo Hernandez de Cos said on Friday. 

The previous increase in January 2020, which was backed by industry groups, had set the minimum at 950 euros.

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