Eurozone wages will keep growing as long as prices remain high, said Raul Ramos, full professor in Applied Economics at the University of Barcelona.
“We all expect prices to stop going up, but while the situation is still far from returning to normal, it’s to be expected that salaries will continue to grow,” Ramos told Xinhua in an interview on Monday, after experts from U.S. bank J.P. Morgan predicted the highest salary rises in 30 years in the eurozone during the first quarter of this year.
In February, the influential financial services group said the wage growth in the eurozone could be as high as 4.5 percent in the first quarter of 2023, the highest figure seen since the first quarter of 1993, exactly three decades ago.
“There are pressures on prices that we haven’t seen since the adoption of the euro, and so salaries are recovering some of the purchasing power they have lost in the past year or so,” the professor explained.
While highlighting the relationship between the high inflation across Europe and rising wages, he rules out the development of a so-called wage-price spiral, in which high prices boost wage rises which in turn fuel higher prices.
“In Spain’s case, many companies are now in the process of negotiating wages, and what we expect is that wages will be set thinking more about how prices will rise during this year rather than how they went up last year,” he explained.
Although the phenomenon of rising wages can be seen across the eurozone, the professor pointed out that each country has its own system for negotiating wages, which is done in Spain by sector via collective bargaining.
“The type of wage negotiations we can expect will be over a long time period so that workers will not lose out, nor will too much strain be put on companies that still haven’t completely recovered from the pandemic and affect them negatively,” said Ramos.
There is still no concrete data on salary increases in Spain, but the recruitment consultancy Michael Page recently predicted that wages in Spain are set to rise by an average of 3.5 percent in 2023.
What’s more, the Spanish government announced on Jan. 31 that the minimum wage in the country will rise by 8 percent, to 1,080 euros (1,154 U.S. dollars) per month, which has a retroactive effect from Jan. 1.
“Raising the minimum wage may not seem the best idea because it can fuel inflation, but it’s also a way to help the lowest-paid workers to maintain their purchasing power. I lean towards it being the right decision at this time when there are no great difficulties in the growth of employment,” said the professor.
Meanwhile, the European Commission has raised its forecast for Spain’s economic growth this year from 1 to 1.4 percent.
Overall, the professor declares himself relatively optimistic for the rest of the year, but he also stresses that the emergence of unforeseen circumstances that could radically change the economic outlook in Europe and Spain cannot be ruled out.
“If we succeed in getting inflation under control and people can overcome their fear of continuing to lose purchasing power because wages cannot match the same rhythm, I don’t think the situation has to be bad, although I do think that a lot will depend on how interest rates develop and how that affects the level of debt of families,” he concluded.