Spain | The paradox of employment and wages

Summary

Spain is experiencing record employment growth that contrasts with the stagnation of wage purchasing power. This situation is explained by an economic model based on the accumulation of jobs rather than improvements in productivity, compounded by a higher tax burden on labor.

Key points

• Key points:
• By the end of 2025, average productivity per worker stood three-tenths of a percentage point below the level recorded in the fourth quarter of 2019.
• Average gross compensation per employee was 3.6% above pre-pandemic levels, but net compensation had fallen by one percentage point compared to the end of 2019.
• The implicit tax rate on labor income, which includes personal income tax and social security contributions, has increased by 8.8% since the end of 2019.
• The perception of wage stagnation is reinforced by rising housing costs, whose prices have increased faster than consumer prices.
• The main priority is not only to continue creating jobs, but also to ensure they are accompanied by greater human capital, more productive investment, better resource allocation, and wider technological diffusion. Without such improvements, employment growth will remain good news, but insufficient to sustainably raise the well-being of Spanish society and fully unlock its growth potential.

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