Source: Chart prepared by Guisan (2009) based on data from OECD National Accounts
The graph shows the evolution of real wage cost (constant prices) per worker in Spain, compared with France, Germany and the United States. We found that the labor cost is below that of Germany, France and the United States, and also decreased in the period 1994-2004.
Therefore we do not agree with the IMF's proposal to reduce wages . On the contrary it is necessary that we increase productivity in order to raise wages, as explained in the article "Wage, employment and productivity English economy "by Guisan, MC and Aguayo, E. published in Volume 8-1 of the magazine EEDI which can be accessed free on the magazine's Web EEDI.
comment on the news. "The IMF warns that Spain, Portugal and Greece will have to lower wages" (See ABC 03/02/2010)
In our opinion the salaries in Spain has grown little in recent decades and should not fall. Therefore it is of utmost urgency to develop the economic policies required to increase production per capita, because it is clear that these policies are essential to prevent the descent of real average wage earned by workers.
In the interesting article EEDI 8-1 shows how the average real labor cost has grown less in Spain during the Webmail decades, both in comparison to these countries as compared with Germany, Italy and others. Thus in the period 1975-2005 that cost increased by 11.8 thousand U.S. dollars (at constant prices of 2000), 14.3 thousands in Britain, 10.8 thousand in Germany, 9.8 thousand in Italy, 8.6 thousand in France and Only 5.5 thousand in Spain.
When comparing international data is important to distinguish whether you are talking about the average wage from the point of view of the entrepreneur ( total labor costs, also called "total cost" by the INE), or from the point of view of the worker ( net salary after all deductions for taxes and social security contributions from employee). In the case of Spain have a heavy weight of social security contributions paid by employers, which does not on the payroll and much more expensive the total labor cost. In
Euribor.com also find information comparing wages gross in Spain located in the middle of Britain, and say:
"The average salary in Spain is in the 21,500 euro gross per year, representing almost half the pay of more than 40,000 euros United Kingdom, Holland and Germany, and 20% below the EU average, according to a report by Adecco and IESE Business School on the evolution of wages in 14 European countries between 2003 and 2008. In particular, pay average in the Old World reached 27,036 euros in 2008. United Kingdom led the ranking of wages, with 46,058 euros for full-time employees, followed by the Netherlands (42,720 euros) and Germany (40,914 euros). " (see full story)
According to the OECD net wages earned by workers in Spain is only 61% of labor cost figures unit, as the remaining 39% consists of "social cost" paid by the company (formerly called employer contribution of social security), "withholding tax on income" and "social security contributions by the employee." 39% of revenue-raising pressure on wages in Spain is higher than in Switzerland, Britain, Canada and other rich countries. Soon include a comparative analysis of our international economy Blog.
INE, in the Quarterly Survey of Labour Cost of the 4 th quarter of 2008, breaks down the labor cost per worker in Spain, according to the following:
"Wage cost ; regular ": € 1548.32 per month,
" Other labor costs (overtime, etc.). ": € 637.62 per month
" Total wage cost "
1897.24 "Difference between the total cost paid by the employer and the total wage cost ": € 637.62
" Total cost " € 2534.86 per month per employee paid by the company.
According to these figures the cost Ordinary wage is a good approximation to "net wages earned, because it represents a 61% of the total cost, the rest of gross wages not received by the worker but amounts to tax and social security contributions paid by the employee. So the net wage earned by workers is much lower in Spain that in countries with which we intend teóricament converge and must not fall.
is true that before the great increase in the number of unemployed should develop policies designed to encourage job creation, reducing the 39% tax burden on employment, alivaría what the cost to businesses, increase employment and reduce the total expenditure for unemployment benefits. The same money would be more people would receive a salary and fewer people would receive a subsidy of desempelo, and also increase the total production and per capita.
If economic policies are followed, such as those proposed in this Blog and other economic studies, support to industry and foreign trade, and all involving support for education and research, including others, would lead to higher output per capita and higher real wages received by workers. We would be competitive in quality and quantity. Therefore we do not recommend lower wages but to increase per capita output for real wages to increase.
13 entry in our Blog World Development, March 2010, discussed our disagreement with some of the statements of the economist Krugman in the New York Times, and our view that wages are not to blame for the English economic crisis but the economic policy mistakes that led to stagnation in productivity in the period 1994-2003 and a decrease in this important variable in the period 2004-2009.
Gurus Blog In included the following comments on Krugman's statements on wages in Spain: MCG
03/02/2010 at 11:32 AM
" In Blog Entry 13 of our World Development, the March 2, 2010, discussed in relation to the views of Krugman, wages are not to blame for the imbalances in Spain but also an economic policy that froze the productivity per worker in the period 1994-2003 and declined since 2004:
There include a clear graph of the evolution of wages and the link to an interesting article by Guisan and Cancel (2006), available free on line, on the relationship between wages and productivity in Europe and USA.
Several EU countries Europe, and Spain in particular, should develop policies that will increase while real wages, real productivity and employment rate. This is possible if it encourages productive investment per capita, industrial development, human capital, social capital and other factors undoubtedly have a positive effect in this regard. "
03/02/2010 at MCG 6:48 p.m.
"A Marcelo say that I totally agree that we must not lower wages but raise productivity. I think that is clear in my comments and our Blog. I also agree that increasing the education level, motivation, reasonable incentives and investment per capita, are essential to increase productivity.
A Alnair told him that I think we should try to keep wages down and of course there are policies that can increase productivity within a period not too long, with improvements even in a year. "
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