It seems like a contradiction to say that worker salaries in Spain are at an all-time low, but corporate labor costs are 3% higher than the European average of 23.7%.
Besides paying employee salaries, companies have to pay their share of social security contributions, unemployment benefits and severance packages. Social Security payments alone account for 23% of their net labor costs. The numbers how companies and workers are struggling to stay competitive by lowering salaries in order to cover other rising labor costs. Reforms have cut how much companies need to pay worker severance, but unemployment benefit costs are still at a two-year high. Also, the pension system has to pay 8 billion euros per month to retired Spaniards in addition to other costs. Paying for all these retired workers when unemployment while unemployment continues to soar is hard enough right now, so lowering the amount that either workers or companies have to pay in Social Security is not a viable option. Yesterday Manuel Tubule lobbied for labor reforms that cut the contributions.
Without taking this step, which the government promised to do but never delivered on, the national labor scene will keep limping along. Salaries will remain flat, which will hurt spending and keep us behind other European nations. This is why the EU wants Spain to intensify its labor reforms.
