Fedea ensures that wage increases grow below the rise in inflation
Fedea rules out the existence of “clear indications” that the rise in prices is also being transferred to wages, although he admits that this would be “a major risk” in the current situation, as stated in the report “Economic situation and response to the crisis in Ukraine”, published this week. The director of Fedea Studies, Ángel de la Fuente, points out that, if this were to happen, it could start “an inflationary spiral which would tend to feed itself and turn a price “step” into a persistent inflationary process”.
For the moment, De la Fuente does not observe “that this is happening”, although he clarifies that the available data “are of limited use” for anticipate this behavior. Among them, he cites the Eurostat index of salary costs per hour worked, which reflects that the growth of salary costs in euros “maintains its moderation in the first half of the year”. However, Fedea specifies that this data may be “distorted” by the pandemic and the use of the Temporary Employment Regulation Files (ERTE) that affect the length of the working day and to the remuneration of employees, in the case of Spain.
The director of Fedea Studies also looks at the statistics of agreements, until September in the case of this report. The agreed wages agreement rose by an average of 2.61% until Septembera figure slightly higher than the figure for August (2.60%), but more than six points lower than the last flash CPI, whose year-on-year rate moderated in September to 9%, leaving double digits after three months above 10%, according to data extracted from the collective bargaining statistics of the Ministry of Labor and Social Economy.
De la Fuente points out that the wage increases agreed upon in the agreements registered are “modest”, although he warns that these data must be interpreted “with caution”, since they show figures agreed in multi-year agreements agreed in previous years.
The Foundation for Applied Economics Studies (Fedea) has also questioned several of the ‘star’ tax measures approved recently by the Executive of Pedro Sánchez. They consider, specifically, that the banking tax, the one levied on extraordinary profits from energy companies and the tribute to the great fortunes -announced to reduce the impact of inflation and the crisis on the Spanish economy – are “very questionable” and are motivated by “a strong ideological charge” and they are driven by an electoral vision of the current situation.
Its Director of Studies, Ángel de la Fuente, has emphasized that the Executive should focus on carrying out an income agreement that includes to pensions. Thinking about the medium or long term, he considers that he should approve an in-depth tax reform and “not a series of patches messing with the rich or with certain regions.”
Furthermore, Fedea warns in its report that the bill that sets the levies on banks and energy companies “exceeded the worst expectations” and that can give rise to demands from the tax point of view that have very bad fit in a Rule of Law. The foundation urges the Executive to adapt the taxes to the European regulation, which restricts this levy on certain energy companies and links it to windfall profits and not to actual income.
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