Inflation is out of control, with maximums not seen since 1985, and although some measures to tackle it, such as fuel cuts, have already come into force, their effects will not begin to be felt for a few months. The main unknown surrounding the rise in prices has remained the same since Russia’s offensive in Ukraine redoubled the pressure that the pandemic had inflicted on prices: when will it end? Given the impossibility of defining a time horizon, the Bank of Spain warns that an adjustment in wages that is equated with the boom of costs would cause this rebound to extend over time, something that would result in “the increase in energy prices, the main factor behind the current inflationary episode, filtering through to the rest of the prices and costs of the economy” . At the moment, the agency points out in a recent study, only half of the workers who have agreed agreements with effect in 2023 are guaranteed the maintenance of purchasing power.
This is confirmed by the box A first analysis of the impact of inflation on collective bargaining in 2022, prepared by Mario Izquierdo and Isabel Soler, and which will be part of the Quarterly report on the Spanish economy of the first quarter of the year. The position of the Bank of Spain regarding how to readjust salaries within the inflationary spiral is not new. Its governor, Pablo Hernández de Cos, has been warning since the beginning of the war that salary increases should be projected for several years and excluding energy prices from the references. A path that businessmen and unions are traveling, with more complications than expected, in their talks to renew the Agreement for Employment and Collective Bargaining (AENC).
The Bank of Spain is not unaware of the importance of the treaty in which the social agents work, since it will serve as a reference within the negotiating frameworks of a lower category. “Currently there is a relatively large volume of latent negotiations pending signature, whose progress in the coming months will be essential to gauge the degree of transfer of the current inflationary upswing to wages in a medium-term time horizon,” it indicates in its report . Although within the AENC it is only unions and employers who debate, the Income Pact promoted by the Government will depend on what is agreed in it. Union sources acknowledge that they will not accept any interference from the Executive within these meetings; while government sources deny having interfered in the talks.
spiral of increments
In its assessment, the Bank of Spain warns that the agreements already agreed and with effect in 2023 present an additional increase in the incidence of salary guarantee clauses. According to data from the Statistics of Collective Agreements of the Ministry of Labour, only half of the workers under these agreements will see their salary increase, a figure lower than that observed before the financial crisis of 2008 (70%). However, for the supervisory body “its upward trend in recent months constitutes a growing risk of second-round effects on inflation”, since this circumstance “entails an increased risk that, eventually, materialize a spiral of wage-price increases that could have very harmful effects on activity and on employment in a medium-term horizon”.
Leaving the increase in energy costs out of the salary revision would imply the use of underlying inflation as a reference, that is, the one that also discriminates changes in fresh food. A rate that in March reached 3.4% year-on-year, four tenths more than in February, which shows that the rise in electricity, gas or gasoline have caused a change in the other products that make up the shopping basket .
He knows in depth all the sides of the coin.