[Spain] OECD countries with largest real wage decline in 2022

According to a new report, in 2022 Spain was among the OECD countries where wages lost the most purchasing power due to inflation, which swallowed nominal wage increases and in many cases caused a parallel increase in the tax burden, Nation World News reports.

In a report on the so-called “wage tax wedge” published on April 25, the Organization for Economic Co-operation and Development (OECD) calculates that the real compensation for employees decreased by 5.4 per cent in Spain.

The wage tax wedge is the difference between the cost of labour paid by companies and what the worker actually receives.

This figure for Spain - which refers to the year-on-year cut through the third quarter of 2022 - is reportedly significantly higher than the average decline of 3.3 per cent in the 32 countries for which data is available.

Six other OECD members had more pronounced declines than Spain: Czech Republic (8.9 per cent), Slovenia (8.6 per cent), Estonia (8 per cent), Mexico (8 per cent), Lithuania (7.5 per cent ) and Slovakia (6.1 per cent).

Wages in other large countries such as Germany (4.3 per cent), Italy (2.8 per cent), the UK (2.7 per cent), the US (2.2 per cent) or France also reportedly lost purchasing power, though less (0.8 per cent). In only one of the 32 for which data is available was there a revaluation in those twelve months, in Hungary (2.5 per cent).

Inflation forecast

Inflation is behind these developments. The OECD area as a whole reached a peak of 10.8 per cent on an annual basis in October 2022 and inflation was 9.6 per cent throughout the year. A level significantly above 2021 (4 per cent) and 2020 (1.4 per cent).

The authors of the study stated that - while not reaching last year’s levels - inflation is expected to remain high in both 2023 (6.5 per cent) and 2024 (5.1 per cent). Or certainly above central bank targets.

In addition, the study’s authors analyse the complex implications of inflation-indexing of the payroll tax burden. This can have the effect of lowering real wages.

The so-called “tax brake” is reportedly produced by the effect of increases in these taxes in the presence of a nominal increase in wages, which in some cases leads the worker to move to a higher tax bracket and so increases the tax that must be paid.

Source: Nation World News

According to a new report, in 2022 Spain was among the OECD countries where wages lost the most purchasing power due to inflation, which swallowed nominal wage increases and in many cases caused a parallel increase in the tax burden, Nation World News reports.

In a report on the so-called “wage tax wedge” published on April 25, the Organization for Economic Co-operation and Development (OECD) calculates that the real compensation for employees decreased by 5.4 per cent in Spain.

The wage tax wedge is the difference between the cost of labour paid by companies and what the worker actually receives.

This figure for Spain - which refers to the year-on-year cut through the third quarter of 2022 - is reportedly significantly higher than the average decline of 3.3 per cent in the 32 countries for which data is available.

Six other OECD members had more pronounced declines than Spain: Czech Republic (8.9 per cent), Slovenia (8.6 per cent), Estonia (8 per cent), Mexico (8 per cent), Lithuania (7.5 per cent ) and Slovakia (6.1 per cent).

Wages in other large countries such as Germany (4.3 per cent), Italy (2.8 per cent), the UK (2.7 per cent), the US (2.2 per cent) or France also reportedly lost purchasing power, though less (0.8 per cent). In only one of the 32 for which data is available was there a revaluation in those twelve months, in Hungary (2.5 per cent).

Inflation forecast

Inflation is behind these developments. The OECD area as a whole reached a peak of 10.8 per cent on an annual basis in October 2022 and inflation was 9.6 per cent throughout the year. A level significantly above 2021 (4 per cent) and 2020 (1.4 per cent).

The authors of the study stated that - while not reaching last year’s levels - inflation is expected to remain high in both 2023 (6.5 per cent) and 2024 (5.1 per cent). Or certainly above central bank targets.

In addition, the study’s authors analyse the complex implications of inflation-indexing of the payroll tax burden. This can have the effect of lowering real wages.

The so-called “tax brake” is reportedly produced by the effect of increases in these taxes in the presence of a nominal increase in wages, which in some cases leads the worker to move to a higher tax bracket and so increases the tax that must be paid.

Source: Nation World News