Published on Friday, May 26, 2023

Spain | Welcome to the wage agreement

An important part of the "incomes pact" was completed several days ago with the fifth Agreement for Employment and Collective Bargaining. Although it consolidates the loss of workers' purchasing power, it ensures that labor costs will not put additional pressure on inflation, which should help maintain employment.

Key points

  • Key points:
  • The pact signed several days ago aims at maintaining the purchasing power of wages from now until 2025. In particular, increases of 4% in 2023 and 3% in 2024 and 2025 are recommended, with a guarantee clause limited to 1 additional point if inflation in December of each year exceeds the agreed revaluation.ional point if inflation in December of each year exceeds the agreed revaluation.
  • Taking into account BBVA Research forecasts for price growth as of December for each of the years of the agreement (3.6%, 2.3% and 2.1% respectively), marginal gains in wages in real terms should be observed.
  • At the end of last year, compensation per employee increased 4%, while BBVA Research expects it to increase 4.7% in 2023 and 4.2% in 2024. In addition, labor productivity is expected to improve in 2023 and 2024 by a similar amount as real wages (around 1%).
  • Therefore, barring unexpected events, the agreement is expected to be consistent with maintaining companies' competitiveness, with businesses continuing to create jobs and with inflation stabilizing at levels of around 2% in 2024.

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