Head of Spain’s Central Bank: Minimum wage hike will lead to youth unemployment

The head of Spain’s Central Bank has slammed the country’s new minimum wage increase, claiming that thousands of young people will lose their jobs as a result.

Banco de España chairman Pablo Hernandez de Cos told journalists that the 22% rise from €735 (US$834.38) to €900 (US$1021.69) per month would lead to 0.8% of jobs being lost - around 150,000. As a result, it would “have the opposite effect to that intended of hindering those we want to help most, young people,” he said. 

Minimum wage increases amounted to 8% in 2017 and 4% in 2018, but Hernandez de Cos claimed that if employers were obliged to pay considerably more, they would be more likely to fire their least productive workers.

"Empirical evidence on the consequences of SMI (salario mínimo interprofesional) rises are varied, but it is usually regarded as having a negative effect on peripheral jobs”, he said, adding that “the most significant impact [would be] on young people and older unskilled workers”. 

According to The Local, the most effective way of protecting these vulnerable workers is to reduce excessive levels of demand for temporary work, stop the exploitation of shift workers and cut high staff turnover.

The proposed SMI rise will add up to €12,600 (US$14,303.63) a year onto the earnings of people on the minimum wage as it is traditional in Spain for workers to receive a bonus salary in the summer and at Christmas respectively, which means they receive up to 14 payments.

Unemployment in Spain fell below 15% for the first time in 10 years during the 2018 summer period, the country’s public data institute INE reported in late October. Youth unemployment remains high at 28%, but is still much lower than during the height of the financial crisis when it hit 55% in 2013.

Meanwhile, in Germany, the legal minimum wage is expected to increase twice next year. As of 1 January 2019, it will rise from €8.84 (US$10.04) to €9.19 (US$10.43) per hour. From 1 January 2020, it will increase further to €9.35 (US$10.61).

But there has been talk of raising it still further to €12 (US$13.62) an hour, the Local reported. Despite a booming economy, millions of Germans live on the poverty line with almost a fifth of the population last year threatened by poverty or social exclusion, according to the Federal Office for Statistics.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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The head of Spain’s Central Bank has slammed the country’s new minimum wage increase, claiming that thousands of young people will lose their jobs as a result.

Banco de España chairman Pablo Hernandez de Cos told journalists that the 22% rise from €735 (US$834.38) to €900 (US$1021.69) per month would lead to 0.8% of jobs being lost - around 150,000. As a result, it would “have the opposite effect to that intended of hindering those we want to help most, young people,” he said. 

Minimum wage increases amounted to 8% in 2017 and 4% in 2018, but Hernandez de Cos claimed that if employers were obliged to pay considerably more, they would be more likely to fire their least productive workers.

"Empirical evidence on the consequences of SMI (salario mínimo interprofesional) rises are varied, but it is usually regarded as having a negative effect on peripheral jobs”, he said, adding that “the most significant impact [would be] on young people and older unskilled workers”. 

According to The Local, the most effective way of protecting these vulnerable workers is to reduce excessive levels of demand for temporary work, stop the exploitation of shift workers and cut high staff turnover.

The proposed SMI rise will add up to €12,600 (US$14,303.63) a year onto the earnings of people on the minimum wage as it is traditional in Spain for workers to receive a bonus salary in the summer and at Christmas respectively, which means they receive up to 14 payments.

Unemployment in Spain fell below 15% for the first time in 10 years during the 2018 summer period, the country’s public data institute INE reported in late October. Youth unemployment remains high at 28%, but is still much lower than during the height of the financial crisis when it hit 55% in 2013.

Meanwhile, in Germany, the legal minimum wage is expected to increase twice next year. As of 1 January 2019, it will rise from €8.84 (US$10.04) to €9.19 (US$10.43) per hour. From 1 January 2020, it will increase further to €9.35 (US$10.61).

But there has been talk of raising it still further to €12 (US$13.62) an hour, the Local reported. Despite a booming economy, millions of Germans live on the poverty line with almost a fifth of the population last year threatened by poverty or social exclusion, according to the Federal Office for Statistics.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

Spain: A mixed bag of opportunities

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