The first minimum wage hike of its kind in Spain has played a significant role in the national election in the country. The massive hike in minimum wage – 22% – has most experts uncertain as to what implications it will ultimately have.
Prime minister Pedro Sanchez of the Spanish Socialist Workers’ Party (PSOE) has won the snap election he called after the Catalan pro-independence party rejected the government’s budget proposal and joined with the center-right opposition. This was Spain’s third election in just four years and due to recent economic crisis, politics have been fragmented.
The looming unemployment problem was a key issue in the election, mainly due to the minimum wage hike that recently went into effect. Many people are worried about the repercussions it may have towards further unemployment.
This has caused the current ongoing debate, which is will the minimum wage hike ultimately be beneficial or destructive towards employment in Spain?
The idea behind the Minimum Wage increase is to drive economic expansion by promoting spending and hiring in a more competitive market. The concept is that higher wages promote spending, and spending creates jobs, but businesses are worried they won’t be able to afford the wage increase. Even those that won’t be directly affected because their employees earn more than the minimum wage are worried it could negatively impact their sales.
Although it is possible the hike will work in boosting the economy, banks in Spain aren’t very optimistic. Spanish banks are estimating up to 125,00 jobs could be lost to the wage hike, and this is very unsettling to many, considering Spain has the second highest unemployment in the Euro zone.
Even supporters of raising the minimum wage have their doubts due to the abrupt decision and drastic increase.
See our Spain payroll & benefits guide for full details on employer and employee taxes, paid time, termination laws and working hours.