Minimum wage 'could rise soon': How much do Spain's workers really earn?

JUST two weeks after socialist president Pedro Sánchez was sworn in for a fresh term, his deputy Yolanda Díaz has expressed a desire to increase the minimum wage in Spain.

Head of the socialist (PSOE) government's left-wing coalition partners, Sumar, Sra Díaz reasoned that the lowest legal salary payable to workers should rise by a figure above the level of inflation, so that employees could 'regain the spending power they have lost' since prices began to spiral.

This means the minimum wage would have to rise by around 3.7% to 3.8%, or approximately €560 a year before tax.

This announcement was made during a conference on achieving equality among women in Spain's gypsy,or gitana community – a long-established and settled group that shares roots with the Roma ethnicity.

“There's no better tool for equality than to raise the minimum wage,” Sra Díaz stated, “and there's no better feminist, anti-poverty or anti-job insecurity policy than this.”

She intends to call meetings with trade unions and representatives from the business community to discuss the matter 'immediately', in order to deal with the current 'unprecedented inflation crisis'.

How the minimum wage works out

Yolanda Díaz's proposal would mean the lowest earners receiving €1,120 per month before tax, based upon 14 monthly salaries – a double pay packet in August and December.

As the 14-month system is rare nowadays outside the public sector, this would mean 12 monthly salaries every year of about €1,156.30 after tax, or a gross annual wage of €15,680.

At present, the minimum wage is a gross €1,080 per month in 14 payments, or an annual €15,120, which gives 12 monthly take-home payments of around €1,132.

These minimum wage figures apply to a full-time job which, in Spain, is currently 40 hours per week – or an eight-hour day and five-day week, discounting lunch hours and breaks.

Unlike in many countries where the standard working week is 09.00 to 17.00 with an hour for lunch or 09.00 to 18.00 with two hours – giving a 35-hour total – anyone in Spain who works 35 hours a week is considered to be part-time.

Also, lunch breaks are typically between two and four-and-a-half hours long, with employees clocking off somewhere between 20.00 and 21.00 – other than in the public sector and banks, where they are more likely to work 08.00 to 15.00 with a 30- or 45-minute mid-morning break.

Tentative moves have been made at government level to encourage firms to reduce the standard working week to 36 hours, or a four-day week of eight-hour days, being 32 hours, with cash incentives to allow them to do so without cutting pay in line with hours worked.

Most workers earn less than the 'average': How much do Spain's employees get paid?

When Pedro Sánchez was first voted in following the November 2019 general elections, his government pledged to follow European Union guidelines and progressively increase the minimum wage until it was at least 60% of the mean national average wage.

In practice, though, the mean average is much higher than the majority of workers earn. 

Figures for the end of 2021 – the most recent available at present – revealed that the average gross annual salary in Spain was €25,896.82, suggesting a 'typical' employee in Spain takes home 12 monthly pay packets of €1,706.

It would mean the minimum wage needs to be at least €15,538 per year before tax, or a net take-home pay of around €1,150 a month in 12 payments.

But the mean average is skewed by the highest earners, not painting a true picture of a 'standard' wage in Spain.

The median average – or figure in the middle – was €21,638.69 per annum before tax (€1,463.30 a month in 12 payments after tax deductions), but again, most workers earn less than this. 

The most commonly-paid salary in Spain for a full-time job averages at €18,502 per year before tax, giving a net take-home pay of approximately €1,277.30, based upon 12 monthly payments per year.

Approximately 563,400 workers in Spain, in keeping with the 2021 year-end statistics, were paid based upon the most common salary for a full-time job, or a pro-rata of this for part-time work.

Another 560,300 were on minimum wage, and around 480,000 were earning the median average of €21,638.69.

Compared with the 1.6 million employees earning between the minimum and the median, around 375,000 were earning what is officially the average wage – the mean figure of just under €25,900 – dropping to 250,000 for those with salaries between this and €30,000 a year, and to just 120,000 for those earning from €30,000 to €40,000 a year.

Most recent figures show that around 62% of the workforce earns less than the mean average, and about 48% are on salaries ranging from minimum wage to the median average of just under €21,639.

Around 31% are on the most commonly-paid salary of €18,502 per year, about one in nine workers are on minimum wage, and one in four is somewhere in between.

Approximately 50% of workers earn less than €22,500 a year, and the top 10% of highest earners get more than €46,600 a year.

Statistical delay: Figures are out of date as soon as they are published

Calculating how much Spain's workforce earns, and needs to earn, is a tough task, however, given that official statistics are, by default, behind the times.

The latest breakdown of earnings, and the most recently-published mean, median and modal averages, are from 2021 – a year which saw the decline of the Covid pandemic, but before the conflict in Ukraine affected fuel and food prices.

In fact, the national tax collection board, the Agencia Tributaria, based upon annual declarations made in spring 2023 for the year 2022, calculates the mean average wage at €29,247 per annum.

If this was representative of Spanish earnings in general, it would mean a typical full-time worker would receive 12 pay packets of a net €1,889.

This would also mean that, to meet the EU's 60% target, the minimum wage would have to increase to 14 gross payments of €1,253, or €17,542 annually, giving a net monthly salary of €1,232 in 12 payments – a hike of 16% on current figures.

Yet the Agencia Tributaria's calculations are unlikely to show the whole picture – anyone whose income in 2022 was below €14,000 did not have to pay tax, meaning they would not have made a declaration unless they thought they may be eligible for a rebate; likewise, anyone with an income of €22,000 or less that came from a single source, such as a full-time job with no other investments, is exempt from making an annual tax declaration.

To this end, Agencia Tributaria data will necessarily be skewed towards middle and higher earners and the self-employed, with little or no input from those on very low incomes.

Gender pay gap: How is Spain doing?

Deputy president Yolanda Díaz's comments about how raising the minimum wage would be a key step forward for gender equality are rooted in official figures – for Spain and for the rest of the European Union.

According to Spain's National Statistics Institute, the modal – or most common – salary for women was 73.2% of that of men, or in region of €5,000 a year less before tax.

Of those on the median and mean average salaries, there were just over 81 female workers for every 100 male workers.

Figures from the European Parliament show that women in the EU-27 earn 12.7% less per hour than men.

Whilst some of these reasons are structural – differences in types of jobs, educational level and experience – the gender pay gap, explains European Parliament, is calculated after discounting all these elements.

Effectively, it is the difference in earnings between women and men of the same levels of qualification and education, with the same amount of experience, and in jobs of a similar calibre – not necessarily identical professions, but of comparable quality.

Only one sole EU country – Luxembourg - has achieved equal pay in real terms, European Parliament reveals; but Spain fares reasonably well, and its gender pay gap is smaller than the average in the bloc.

Compared with Estonia, where female employees in similar circumstances to male workers earn 20.5% less, or Austria (18.8% less), Germany (17.6% less), Hungary (17.3% less) and Slovakia (16.6% less), Spain's women earn 8.9% less than its men.

The countries with the smallest gender pay gap are Romania, where women earn 3.6% less than men; Slovenia, with a difference of 3.8%; Poland, at 4.5% less; and Italy and Belgium, where female workers get 5% less pay than male employees.

In Spain, INE figures for the end of 2021 showed that 10.7% of men were on minimum wage, compared with 25% of women, with the gap closing on an upwardly-sliding scale as earnings became higher.

Around 0.07% of female earners and 0.22% of male earners are on Spain's top-tier wages, though – a very small percentage of the population in both cases, but with three times as many men as women.

The statistics showed that women were twice as likely as men to be in part-time jobs, although qualitative data have not been revealed – it is unclear how far this is by choice, by necessity, or by limitations in availability.

How have Spanish companies reacted to another minimum wage rise?

The lowest-permitted legal salary for a full-time job has seen dramatic increases in a very short time, largely spearheaded by left-wing leaders: Five years ago, when Pedro Sánchez's PSOE came into power, the minimum annual gross wage was €10,303, giving 12 monthly take-home payments, based upon today's tax rates, of €765.50.

It would have been slightly lower back then, in 2018, since the minimum annual wage is normally an approximate baseline for the minimum threshold for paying income tax – a threshold that is currently €15,000, for the year 2023. 

The bottom salary figure had changed very little in many years. A decade ago, it sat at €9,034 (at current income tax rates, €660 a month in 12 payments), and 15 years ago, it was €8,400, or the equivalent of 12 net pay packets a year of €607.

In fact, 20 years ago, when a 'comfortable' living wage was only slightly lower than today's mean average salary, the minimum was €6,317, or about €433.30 a month in 12 payments after tax.

Whilst the sharp salary hikes – 47% in the past five years under Sánchez's government - have, clearly, been necessary for the workforce, and to meet the EU target of its being 60% of the mean average wage, they have proven a challenge for companies. This is particularly enhanced in an industry panorama like that of Spain, where around 75% of firms are small and medium-sized businesses (SMEs), often family-run.

Even then, the minimum wage rises between 2021 and 2023 have effectively been zero, given that the total increase of 12% in pay has been cancelled out by a 12% increase in living costs over the same period.

But this time, Yolanda Díaz reveals, it was the business community which approached her, rather than the other way around.

The corporate world recently presented an unexpected proposal to increase the minimum wage by 3% in 2023 and 2024, meaning next year would start with a raise for the lowest earners to €1,112 a month in 14 payments before tax – an annual €15,568, giving 12 monthly net pay packets of €1,151.40.

Then, for 2025, the minimum salary was to go up to 14 gross payments of €1,146 - €16,044 per annum, or 12 net payslips of €1,172.20.

This proposal even included the possibility of an additional 1% rise each year if inflation continued at above an ideal level – universally considered to be that of the European Central Bank's (BCE's) target of 2%.

Business and industry representatives nationwide said their figures are in line with a cross-union deal struck in May 2023 concerning wage increases to cope with rising consumer prices.

What the unions say

This said, Spain's main unions, the Labourers' Commissions (CCOO) and General Workers' Union (UGT) both consider the industry community's desired wage rise to be 'insufficient'.

Neither has given specific figures, but they concur that the minimum salary should be at least 60% of the mean average wage before being adjusted upwards to reflect soaring prices, especially food prices.

The central government always has the 'casting vote' on minimum wage issues, according to the national Workers' Statute, although it is obliged to consult with the 'most representative' unions and industry associations.

What the OECD says

Any wage rise decision should be calculated 'carefully' and with 'great caution', say some organisms and economists who are less enthusiastic about proposals by Yolanda Díaz, the unions and the business community.

Many experts and official bodies have said minimum salary increases should focus, not on the mean average earnings for a country, but on the realities of the job market and levels of productivity in the national economy, whilst factoring in cost-of-living figures.

One of these bodies is the Organisation for Economic Cooperation and Development (OECD), which represents the world's developed countries and emerging economies.

“Spain's minimum wage has risen considerably since 2018, which has increased income and spending power and reduced inequality among young adult workers,” the OECD states.

“However, such significant wage rises risk damaging employment market availability for certain segments – especially young adult workers.”