Paradox of Minimum Wage Increase
Spanish Case Concerns
Minimum wage increase is in principle good news for the workers, even if affecting not so big percentage of the country workforces (3 to 13,5% in case of Spain), its level is generally used as a landmark for the wages’ negotiation in the economy.
It can be seen as one of the measures for tackling the question of productivity and wages decoupling registered by OECD in the most industrialized countries, including the EU. Wages lagging behind the productivity reflect a progressing loss of position of labour in face of capital and the growing inequality. When workers do not receive their fair share in produced wealth it is not good for the economy, as affecting the consumption and thus investment and innovation perspectives.
However, these kinds of measures need to take into account the structural nature of the economy. First of the problems can be related to the ‘false self-employment’ reinforcement, as in this way even more workers can be forced to become self-employed in order to have their job. Needless to say, labour conditions and social protection for self-employed are much worse. It is especially the case of new ‘platform economy’ which in order to lower the short-term costs of the services and/or products, in this way transfers the social costs of their workers into the national state and furthermore the society.
For some cases, it can also reinforce the shadow economy where the workers are not granted any contract (and protection) at all. Joining it together with the tax avoidance of big and gig corporations, the ‘future of work’ subject needs to be urgently addressed. The workers welfare would be much better assured if they could be granted the access to the property of means of production (like online platforms) or even their own data when understood in equal terms with labour, land and capital. There are also arguments in favour of UBI or Universal Basic Income, however the most probably UBS or Universal Basic Services would be a much more comprehensive measure to tackle the issue.
Another question strongly correlated and affecting the workers and citizens welfare is the cost of life in general. Related to purchasing power parity, it must be recognised that the main cost of living is related to housing, which is surprisingly out of the discussion for instance in the innovation subject matter, e.g. Horizon Europe. During the last 2008 crisis, real estate bubble burst adjustment was abated, in some cases like Spain to a strong degree, mainly by the banks and government bodies, as when real estate value is less, mortgages value becomes less, needless to say, it affects banks value and host country evaluations. What is more, in the last years we can see once more the real estate prices soaring. In Spain pervasively, the old challenges as renting and construction regulatory landscapes (especially re-zoning of lands for construction), being a big portion of the origin of the bubble and general population suffocation are still not being addressed.
Furthermore, the introduced minimum wage increase is only one side of the coin of proposed measure, as minimum wage can impact the calculation of (minimum) social security contribution base, as in the case of Spain. In this way, it affects the net perceived wages of all workers, what increases the so called ‘fiscal gap’ (difference between net and gross wages), thought-provoking if it is already high. This is especially worrying as it is regressive, i.e. it affects much more the workers with lower salaries. It influences particuarly the small and medium enterprises and the self-employed, autonomous professionals with workers.
As it can be seen from the argumentation above, in principle good looking changes, introduced without bearing in mind all their effects and collateral impacts can be counterproductive. This is also probably the reason why many advanced countries do not long for the minimum wage introduction…
