Pensions have appreciated more than the salaries of young people since the great crisis of 2008

The great financial crisis of 2008 left a deep wound in the Spanish economy that has never fully healed for some groups.. One of the most obvious examples is that of young people, whose salaries have grown even less than their pensions have increased since the outbreak of the great recession.

In 2022, the average salary of a young person between 16 and 24 years old amounted to 1,315 euros per month in 12 payments, 12.1% more than in 2008. In the case of young people between 25 and 34 years old, the average salary last year was 1,850.55 euros per month, 14.2% more than at the beginning of the crisis, according to the latest employment salary decile statistics. main one that the INE recently published.

However, the accumulated revaluations of pensions in that same period reach 14.6%. In that same period, the average retirement pension has increased much more – from 814 euros per month in 14 payments in 2008 to 1,254 in 2022 (54%) – but this is largely due to the effect of entering the system of retirees with higher pensions, not only to the revaluation of benefits.

Both young people and pensioners have suffered a significant loss of purchasing power since 2008. Between 2008 and 2022, consumer prices increased by 25.5%, while the salaries of young people between 16 and 24 years old grew by 12%; those of young people between 25 and 34 years old 14% and the revaluation of pensions accumulated 14.6%. This implies that while pensions have lost 10.8 points of purchasing power, young people's salaries have lost between 11 and 13 points.

However, the difference in loss of purchasing power between young people and pensioners will foreseeably increase in 2023.. The reason is that, while pensions have been revalued by 8.5% to maintain their purchasing power, salaries have not enjoyed the same protection. The problem is that we cannot know how much salaries have been devalued this year because the salary statistics are a year behind the present time.

The effect of the crisis, added to the entry into the pension system of workers with more stable and better-paid careers, has caused a striking effect. And the average retirement pension is now higher than the salary of the youngest. In 2008, the average salary of the population between 16 and 24 years old was 1,173 euros per month in 12 payments, while the average retirement pension prorated to 12 payments was 950 euros per month.. Last year, the retirement benefit averaged 1,463 euros on 12 payrolls, while the salary of the youngest was 1,315, 150 euros less per month.

Two different crises

The financial crisis hit younger generations and pensioners very unevenly. Between 2008 and 2015 hundreds of thousands of young people lost their jobs and many others suffered drastic salary cuts. In the worst moments of the crisis, the average salary of the population between 16 and 24 years old was 12% below the 2008 level. In the case of citizens between 25 and 34 years old, the drop was 7%. Furthermore, the collapse in wages was much greater among young people with lower salaries. At the lower end of the youth salary spectrum, remuneration fell up to 21% below the pre-crisis level.

While the younger generations did not recover the salary level of 2008 until 11 years later, the average salary of the rest of the age groups never fell below the pre-crisis level. The only exception was those over 55 years of age, who suffered a much slighter decline.

Young people's salaries did not begin to gain traction again until 2019, thanks to increases in the SMI and the rebound in employment. In this period of time, the younger generations closed a good part of the purchasing power gap that opened with pensioners. However, the strong inflation that affected the economy in 2022 truncated the recovery of purchasing power for all employees, including young people.

The history of pensioners is different. Although the group also suffered the impact of the crisis, they never saw their income cut as happened to young people or pensioners in other southern European countries.. During the years of the crisis, pensions rose less than inflation on five occasions, which led to angry protests from the collective.

The fact that pensions were not nominally reduced turned these incomes into a lifeline for millions of families who did see their income cut. In a period in which one in four Spaniards who were actively looking for work was unemployed and in which millions of workers suffered salary cuts, pensioners became the breadwinners of a not insignificant part of the country.

Different realities, different problems

Furthermore, it must be taken into account that the pension system hides very different realities. While there are a large number of pensioners who receive benefits of more than 3,000 euros per month, at the same time there are 40% of people whose benefits do not exceed the minimum wage in 2023.

Beyond that, pensioners and young people face very different problems and their conditions obey different dynamics.. One of the keys is housing. 89% of those over 65 years of age live in a home they own and, in most cases, these are properties that no longer have any burdens. On the other hand, almost half of young people between 16 and 29 years old live in rent, a market in which prices have risen drastically in recent years.

Likewise, it should not be forgotten that the working and salary conditions of young people depend on the labor market.. Whether young people's salaries are higher or lower is determined by companies depending on the economic situation. On the contrary, the revaluation of pensions is determined by the Government, based (theoretically) on the resources that the State has.. However, it must be taken into account that the income of the vast majority of retirees depends entirely on the pension system.