The 22% rise in the minimum interprofessional salary (SMI) in 2019 subtracted between 0.6 and 1.1 percentage points from job creation that year, with a special incidence among young people and those over 45 years of age, according to the analysis published this Tuesday by the Bank of Spain. The translation of these percentages is that up to 180,000 jobs were not created in the country.
Making a calculation with the data provided by the supervisor, the rise in the minimum wage caused between 98,000 and 180,000 hires to fall by the wayside. These figures are not provided by the Bank of Spain, but they can be drawn from its conclusion that this increase “would have reduced the net employment of those affected (lower or equal salaries) between 6 and 11 percentage points” at the end of 2019. Bearing in mind account that these affected “represented approximately 10% of total employment in December 2018, the 22% increase in the SMI would have meant between 0.6 and 1.1 percentage points of lower employment.” Taking the EPA (Active Population Survey) for the fourth quarter of 2018 -a total of 16,453,000 affiliates-, the resulting bracket comes out.
In the study, the agency indicates that as of January 1, 2019, “a sharp drop is observed” in contracts with contribution bases less than or equal to 1,050 euros (SMI in 12 payments). Meanwhile, contracts with salaries between 1,051 and 1,250 euros, which remained stable with about 1.6 million hires in previous years, rose in 2019 to 1.8 million.
All these contracts with a maximum income of 1,250 euros showed less growth than those related to salaries between 1,251 euros and 1,350 euros. Said negative spread was “relatively stable” and was around 5 percentage points, until in January 2019 “it became more negative continuously throughout the year”, reaching 15.7 points at the end of the year. exercise, and was concentrated among those who were below or close to the SMI (1,050 euros per month), since the performance of contracts between 1,056 and 1,250 was better.
The study points out that the impact of the SMI on net employment “could be reflecting the operation of two different channels”, so that “it could be that workers with lower wages lost their jobs more likely than usual after the rise in the SMI ” and that, even if there had been no changes in the dismissals, “job creation at those wage levels could have been reduced without having been compensated with new jobs at somewhat higher wages.” The calculations would indicate that “both margins could have contributed to the observed net destruction of contracts.”
In this sense, the Bank of Spain estimates an increase in the probability of losing one’s job with respect to the counterfactual scenario, of maintaining the SMI unchanged, of between 2.3% and 3.2%, depending on the model considered by the institution. -one that includes the gap between the salary obtained in 2018 and the new minimum wage of 2019 for the beneficiaries of the increase, and another model with an indicator of whether the worker is within the group affected by the increase-. Under both models, those affected over 45 years of age show a higher propensity to lose their job.
The Bank of Spain also offers another calculation in terms of the elasticity of employment: for each percentage point of increase in the SMI, there would be a lower growth in employment of the workers directly affected by between 0.3 and 0.5 points.
Another problem for the young
In addition to the loss of employment, the increase in the SMI increases the chances of moving from a full-time contract to a part-time one for the youngest, who also see their chances of finding a job reduced.
The Bank of Spain warns that the article is limited to providing additional evidence on the impact of the increase in the SMI on employment and may leave out other elements that are considered in these decisions.
“The work therefore does not enter into the global evaluation of the SMI, since this evaluation cannot be limited solely to the evolution of the employment of the affected population. In particular, there may be arguments of equity and improvement in the standard of living of some workers, which are relevant when determining the level of the SMI and which are not the object of analysis in this work”, he concedes.