Employment improves, but wages do not rise
Posted: Sun Dec 15, 2024 9:12 am
We explain the main reasons why the labour market recovery is characterised by an increase in employment, but not in wages.
In 2017, wages grew 0.5% less than prices, which implies a loss of purchasing power.
Improving wages and productivity is one of the important challenges facing the Spanish economy.
Labour markets are like a polyhedron which, when observed from different angles, can provide us with disconcerting conclusions. Working conditions, conflict, accident rates, activity rates of different groups, territorial and sectoral disparities, unemployment, etc. do not always move in the same direction.
However, there are two “protagonists” that capture much of our attention in labour markets. They are employment and wages . It seems logical that a labour market recovery austria email list 860976 contact leads would be accompanied by vigorous job creation and widespread wage increases. However, wages are lagging behind . In 2017, they grew 0.5% less than prices , which implies a loss of purchasing power in a context of growth. Let us look at some of the main causes.
The composition effect
During the crisis, a significant proportion of workers who lost their jobs were on low wages and in precarious conditions. This meant that their share in the total decreased. As a result, the typical worker who kept his job was older, more experienced, more educated… and, consequently, had a higher salary. Although the crisis affected everyone's wages, the average salary fell less because the weight of the highest earners increased.
Start of marked textShare the data! In 2017, wages grew 0.5% less than prices , which implies a loss of purchasing power.End of marked text
As employment has recovered, the opposite is happening. Yes, there are new profiles that provide great value to companies and that have higher than average remuneration. However, a very significant part of job creation is focused on precarious jobs , which contributes to the fact that the average salary is not recovering strongly.
An important aspect is the recovery of youth employment and the incorporation of new generations of workers . In general, they have less experience and even less training than the older ones . This explains part of their lower salaries.
On the other hand, seniority bonuses contribute to increasing the gap between the salaries of young and veteran employees. In fact, many companies tend to pay seniority above what would be normal based on their contribution to productivity. The reason is disciplinary and to encourage effort. With this they try to get the worker to fulfill his responsibilities. If he were fired (for example, due to a disciplinary sanction ) he would lose the seniority accumulated in the company and it would be difficult for him to find similar conditions.
In addition, many of these young people who are joining the workforce are doing so in low-productivity positions and sectors . The result is that the increase in the weight of their salaries within the total Spanish wage bill is contributing to containing the average Spanish salary.
In 2017, wages grew 0.5% less than prices, which implies a loss of purchasing power.
Improving wages and productivity is one of the important challenges facing the Spanish economy.
Labour markets are like a polyhedron which, when observed from different angles, can provide us with disconcerting conclusions. Working conditions, conflict, accident rates, activity rates of different groups, territorial and sectoral disparities, unemployment, etc. do not always move in the same direction.
However, there are two “protagonists” that capture much of our attention in labour markets. They are employment and wages . It seems logical that a labour market recovery austria email list 860976 contact leads would be accompanied by vigorous job creation and widespread wage increases. However, wages are lagging behind . In 2017, they grew 0.5% less than prices , which implies a loss of purchasing power in a context of growth. Let us look at some of the main causes.
The composition effect
During the crisis, a significant proportion of workers who lost their jobs were on low wages and in precarious conditions. This meant that their share in the total decreased. As a result, the typical worker who kept his job was older, more experienced, more educated… and, consequently, had a higher salary. Although the crisis affected everyone's wages, the average salary fell less because the weight of the highest earners increased.
Start of marked textShare the data! In 2017, wages grew 0.5% less than prices , which implies a loss of purchasing power.End of marked text
As employment has recovered, the opposite is happening. Yes, there are new profiles that provide great value to companies and that have higher than average remuneration. However, a very significant part of job creation is focused on precarious jobs , which contributes to the fact that the average salary is not recovering strongly.
An important aspect is the recovery of youth employment and the incorporation of new generations of workers . In general, they have less experience and even less training than the older ones . This explains part of their lower salaries.
On the other hand, seniority bonuses contribute to increasing the gap between the salaries of young and veteran employees. In fact, many companies tend to pay seniority above what would be normal based on their contribution to productivity. The reason is disciplinary and to encourage effort. With this they try to get the worker to fulfill his responsibilities. If he were fired (for example, due to a disciplinary sanction ) he would lose the seniority accumulated in the company and it would be difficult for him to find similar conditions.
In addition, many of these young people who are joining the workforce are doing so in low-productivity positions and sectors . The result is that the increase in the weight of their salaries within the total Spanish wage bill is contributing to containing the average Spanish salary.