The average remuneration of employees in Spain -including cash and received in kind- increased by 5.1% in the first quarter of the year, the largest increase in salaries in the country since 2008, according to the National Accounts data published by the INE this Friday.

This is the eighth quarter in which there has been an acceleration in the rate of wage increases, since wages began to rise in the April-June 2021 period. At that time, they had been slowly slowing down since the second quarter of 2020, when the pandemic broke out, to the point that in the second quarter of 2021 they registered a decrease of 3.6% year-on-year.

After reaching that minimum, the gradual recovery of employment pushed wages up and they have not stopped growing since then, going from increases of around 2% in the central part of 2022, to 4% in the last quarter of last year and 5.1% in the first of this year.

On average in 2022, the remuneration of employees grew by 2% compared to a general rise in the price level of 8.4%, which meant a strong loss of purchasing power for workers in the country. However, in the first quarter of 2023, the growth rate of remunerations exceeds inflation, since the year-on-year CPI registered an average growth of 5.06% in the first three months of the year compared to an increase of 5. 1% in wages.

This recovery in salaries is due to different factors. On the one hand, the increase in intensity in collective bargaining to achieve salary increases in line with the inflation forecast for this year has contributed to the increases, as well as the activation in January of salary review clauses in accordance with inflation, which translates in a rise in wages.

In addition, the good performance of the labor market (with an increase in Social Security affiliation of more than half a million jobs in the first five months of the year) favors a rise in wages, since the greater the demand for workers who companies have, higher is the equilibrium salary.

Added to this is the fact that in some sectors there are not enough workers to cover the demand for employment, so, to try to fill these vacancies, companies raise wages to attract staff.

The rise in the Minimum Interprofessional Wage (SMI), from 1,000 to 1,080 euros, which came into force in January, has also been able to influence, which in turn usually generates a ‘drag effect’ of wages upwards.

In total, what companies in Spain spent on remunerating workers grew by 7.8% in the first quarter, but it must be taken into account that this result is partly due to the fact that the number of employees has grown by 2 .6% in the period.

Workers have been more productive. Specifically, productivity per full-time equivalent job position grew by 1.8% in the first quarter.

Although employment in Spain in terms of the number of employed persons far exceeds the levels of 2019, the hours worked in the country are still 0.5% below the levels prior to the pandemic and 6.3% below the maximum reached in 2008.

This decrease in hours worked – which is common to other European economies, as the ECB has warned – is due to different factors. On the one hand, because the increase in part-time or temporary jobs that occurred after the financial crisis has not yet been reversed, which implies that there is a pool of underemployed workers who would like to work more hours.

The needs for reconciliation and the increase in sick leave -due to the aging of the population and the shortage of personnel in the public sector to quickly process registrations and withdrawals from Social Security- have also caused an increase in on-time working days partial, which in turn translates into a decrease in hours.

In addition, with respect to the maximum of 2008, it must be taken into account that since then there has been a sectoral restructuring of the economy, with a loss of weight of sectors such as construction (which is intensive in hours worked) and an increase in the weight of public sector (which tends to work fewer hours).

According to the criteria of The Trust Project