The rise in inflation in Spain is directly related to energy prices and the consequences of Trump's intervention in the Middle East, as well as the persistence of the war in Ukraine. It rains on wet ground. Since 2021, there have been significant increases in energy prices, supplies, raw materials, and food that have raised the cost of living for Spanish households.
Moreover, there is an aggravating factor. The CPI does not fully capture the evolution of very determining prices. Particularly, the price of housing is continuously rising without the competent administrations (which are all, but especially the autonomous communities) doing enough to reverse this situation.
So far, the measures aimed at containing inflation have basically focused on fiscal ones, especially those affecting fuels. It is also worth highlighting the most structural of all, which was the so-called "Iberian exception", and which demonstrated that it was possible to act on the price-setting system in the face of a shock in gas prices, but above all that we cannot falter in the attempt to gain energy autonomy through the deployment of renewable energies, reducing dependence on fossil sources.
This dependence makes us vulnerable to geopolitical fluctuations. And this weakness is paid for by the popular and working classes of our country in their shopping basket, and a good part of our productive fabric in its cost structure. But beyond these considerations, it is worth addressing some issues that seem significant to us about how the disposable incomes of millions of households in Spain are being devalued. I will briefly describe some good news, some bad news, and a risk.
"This dependence makes us vulnerable to geopolitical fluctuations. And this weakness is paid for by the popular and working classes of our country"
Wages are going to rise
First, the positive note. In my opinion, in our country salaries are going to rise and they will do so significantly in the coming years. As the productive fabric transforms and we establish higher value-added activities (and the aforementioned transformation of the energy mix is key in this sense), the capacity for salary improvement increases. Furthermore, the demographic evolution of Spain will determine that the largest generations of baby boomers move into retirement ages and those replacing them in the labor market will be fewer.
The salary negotiation capacity of Spanish youth is going to be higher, although they may be convinced otherwise, especially if they organize unionically. In fact, even today average salaries are growing, along with employment and productivity per hour worked. And this has practically never happened in our economic history. According to data from the EPA, between 2018 and 2024 the average salary increases more than inflation, with a cumulative rise of 2.8% in real terms. The average monthly salary is 2,386 gross euros prorated over twelve payments, for 18.46 million salaried people.
Growth is not distributed equally
But having said that, some notes that are not positive. Economic growth is not being distributed sufficiently and the impact of prices affects more those with medium and low-medium incomes. Even in this context of record employment. Although people with lower salaries have seen their purchasing power reinforced by the increase in the SMI, they still have subsistence wages. And, moreover, and this is particularly important, 63% of those millions of salaried people earn less than the average salary, and 50% do not exceed 2,001 gross euros in twelve payments.
The second negative note is that inflation is an index that only partially captures what is happening. The purchase price of housing is outrageous, and those families who have to bear a mortgage buy fewer basic goods with their salaries.
"Inflation is an index that only partially captures what is happening"
Housing, healthcare, and education eat up salary improvement
And here appears another important issue. Household consumption is increasingly directed towards the acquisition of services. Spanish families dedicate a larger part of their income to connectivity, housing, but also to health, education, and care. And a good part of that increase is related to the insufficiency of public policies.
Spanish families' spending on higher education increased by 26.3% from 2015 to 2021; the nominal spending of households affected by higher Vocational Training has doubled between 2016 and 2023. In health matters, what Spanish families dedicated to health reaches almost 5% of their total budget, according to the Family Budget Survey conducted by the INE. If desired, a reduced percentage of the shopping basket (due to the universal and public nature of our health system), but growing in recent years.
Therefore, we can affirm that a very substantial part of the disposable income of millions of families in Spain is being deducted to face expenses as a consequence of political decisions made in housing, health, education, and dependency. The increases in these expenses eat away at the nominal improvements in salaries.
The "anti-tax mirage"
And, finally, the risk. The anti-tax mirage. A whole current of political and economic thought is advocating that the improvement of families' income comes from an increase in net salaries. But not through a distribution of profits (at historic highs) from companies to the paychecks of the working class, but by reducing public revenues through a reduction in taxes and social contributions, thus leaving "more money in the pockets of citizens." This approach is deceptive.
One thing is temporary fiscal relief measures in the face of shocks in prices, as the Government has sometimes adopted or in some circumstances the CCAA in their autonomous segments, and another is a structural approach to tax reduction in our country. It would result in a deterioration of the quality and sufficiency of these citizen care services, which will ultimately detract from the income and salaries of families.
And it would also generate greater inequality, segregation, and social poverty. That said, it would improve the benefits of a part of the business community, especially the one most linked to the productive sectors specialized in capturing public resources and setting prices not exposed to competition.
The improvement of purchasing power in Spain must be based on a strong increase in wages, a reduction in energy costs, a better public provision of common goods through a renewed welfare state for the 21st century, and an intervention in markets where strategic business operators set abusive prices, urgently addressing the particularity of housing.