Spain's 22% minimum wage rise this year has ignited a high-stakes debate about the potential impact on the economy.
The Socialist government believes the increase will bolster spending and hiring. But opposition lawmakers and wary business executives say any additional boost to the economy will not be enough to offset the thousands of jobs they expect to be lost because employers cannot afford to cover the jump in costs.
The minimum wage rise to €900 (US$1,021) from €736 (US$829) a month came into effect at the start of the year and directly affects about 8% of Spain’s workforce, the equivalent of 1.2 million employees. Its impact is already rippling through the country’s economy, forcing companies to respond.
According to Bloomberg, Spain’s Central Bank has estimated the pay jump could destroy around 125,000 jobs this year. But it also acknowledged that it was impossible to know for sure given the “uncertainty associated with a national minimum wage increase on an unprecedented scale in Spain.”
Raymond Torres, an economist at the Funcas think tank in Madrid, on the other hand, said recent evidence showed that higher salaries fuel greater spending, which in turn sparks more hiring, offsetting most of the job losses.
Madrid joins other governments around the world, including France, Greece, a Canadian province and some US states, that have recently boosted minimum wage rates in a bid to jumpstart broader salary growth.
In South Korea, meanwhile, the unemployment rate has leapt to a nine-year high as more people shun low-paying work in the face of rising minimum wages. Following a 29% hike in the minimum wage two years ago, the unemployment rate rose to 4.4% in January in seasonally adjusted terms, according to Nikkei Asian Review. Most of the job losses were experienced in the manufacturing and construction sectors, data from Statistics Korea showed.
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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Spain's 22% minimum wage rise this year has ignited a high-stakes debate about the potential impact on the economy.
The Socialist government believes the increase will bolster spending and hiring. But opposition lawmakers and wary business executives say any additional boost to the economy will not be enough to offset the thousands of jobs they expect to be lost because employers cannot afford to cover the jump in costs.
The minimum wage rise to €900 (US$1,021) from €736 (US$829) a month came into effect at the start of the year and directly affects about 8% of Spain’s workforce, the equivalent of 1.2 million employees. Its impact is already rippling through the country’s economy, forcing companies to respond.
According to Bloomberg, Spain’s Central Bank has estimated the pay jump could destroy around 125,000 jobs this year. But it also acknowledged that it was impossible to know for sure given the “uncertainty associated with a national minimum wage increase on an unprecedented scale in Spain.”
Raymond Torres, an economist at the Funcas think tank in Madrid, on the other hand, said recent evidence showed that higher salaries fuel greater spending, which in turn sparks more hiring, offsetting most of the job losses.
Madrid joins other governments around the world, including France, Greece, a Canadian province and some US states, that have recently boosted minimum wage rates in a bid to jumpstart broader salary growth.
In South Korea, meanwhile, the unemployment rate has leapt to a nine-year high as more people shun low-paying work in the face of rising minimum wages. Following a 29% hike in the minimum wage two years ago, the unemployment rate rose to 4.4% in January in seasonally adjusted terms, according to Nikkei Asian Review. Most of the job losses were experienced in the manufacturing and construction sectors, data from Statistics Korea showed.
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 STORIES THAT MAY INTEREST YOU
Czech Republic boosts minimum wage
India restores minimum wage increase
Taiwan to introduce national minimum wage
