The rise in inflation places the average salary increases below the price increase in September for the first time since April

Rising inflation keeps attention on consumers' pockets. In the last year, prices have increased by 3.5%, as confirmed this Friday by the National Institute of Statistics (INE). The rise of almost one point in the variation rate of the CPI in September has caused the wage increases agreed in the collective agreements to be below the price increase for the first time in five months, despite the progress of the revaluation of the salaries.

The collective bargaining statistics of the Ministry of Labor indicate that the salaries agreed upon in the 3,110 agreements registered until September have risen on average by 3.41%, an increase that has affected more than 9.5 million workers.. This revaluation improves the August figure (3.38%) and closes the gap with the 4% increase recommended in the V Agreement for Employment and Collective Bargaining (AENC) signed by unions (CCOO and UGT) and employers (CEOE and Cepyme) in May as guidance.

Despite the upward trend in salary increases agreed upon in the agreement, the growth in prices brought forward the revaluation of salaries in September.. In year-on-year terms, inflation accelerated nine tenths in the ninth month of 2023, reaching a rate of 3.5%, the highest in five months, as reflected by INE data.. The rise in prices slightly exceeds that in salaries, something that has not happened since April, when the CPI variation rate reached 4.1%, compared to an agreement wage increase of 3.14%. In the following months, the slowdown in inflation left room for salaries, which grew above 3.2%.

In this period, inflation has risen for three months, after falling to 1.9% in June, momentarily meeting the European Central Bank's (ECB) objective of containing price growth to 2%—suspended until end of the year-. That slowdown was circumstantial. The threshold desired by the monetary authority was exceeded again in July, with an interannual variation rate of the CPI of 2.3%, which has been followed by two more increases. The most pronounced has been that recorded in the last month, in which inflation accelerated nine tenths to register a rate of 3.5%.

The rise in prices is fundamentally due to a statistical effect called 'base effect' or 'step effect'. When inflation is measured in year-on-year terms, as a percentage of variation between the CPI of one month and that of the same period of the previous year, the comparison with September 2022—when the escalation in energy prices began to subside—is unfavorable.. Gasoline, for example, has become more expensive by 15.8% in the last year. In fact, by excluding the price of energy and unprocessed food from the calculation, core inflation moderated in September by three tenths to 5.8%, its lowest rate since June 2022.

An indicative 4%

In this way, the increase in inflation has not been unforeseen, but was expected due to the 'base effect', which will continue to push the CPI upwards until the end of the year.. The European Commission's forecasts indicate that Spain will close 2023 with an average level of price increase of 3.6%, the lowest rate expected among the main economies of the eurozone and similar to that predicted by the Bank of Spain. In this inflation environment, the social agents signed the V AENC in May, a framework agreement that recommends salary increases of 4% in 2023 and 3% for both 2024 and 2025, with a salary review clause that, in the event of deviation from inflation, could imply additional increases of up to 1% for each of the years of validity of the agreement.

According to data from the Ministry of Labor, most of the salary increases with effect in 2023 were agreed before employers and unions reached an understanding and are far from the level set in the framework agreement. Specifically, 74.2% of the 3,110 collective agreements that have given rise to salary increases so far this year were signed before 2023 and include average increases of 3.09%, compared to an increase of 4.27% signed in the 801 agreements reviewed this year.

There are also differences by sector, agreements relating to domestic activities are those that include the largest increases, with an average salary increase of 6.35%. They are followed by the agreements signed in the sectors of artistic and recreational activities, hospitality and commerce, all of them with average revaluations above 3.7%. On the other hand, agreements related to the supply of energy, real estate activities and extractive industries do not reach an average increase of 2.4%.

Decreased purchasing power

The upward trend in salary increases does not compensate for the loss of purchasing power that salaries have accumulated in recent years. The average salary increase agreed upon in the agreement in 2022 was 2.99% – the percentage rose to 3.18% once the salary guarantee clauses were applied – a figure almost three times lower than inflation, which registered a rate average of 8.5% for the year as a whole. Although less profound, in 2021 the difference had also been in favor of the CPI, with salaries rising on average by 1.61%, compared to the 3.1% annual variation in prices.

According to collective bargaining statistics, only 449 of the agreements registered so far this year include salary guarantee clauses—and only 311 do they apply retroactively—that is, they contemplate upward or downward modifications to the salary tables. depending on price developments. These safeguard clauses affect 2.19 million workers, which represents 23% of the total number of employees covered by the more than 3,110 agreements recorded so far this year.