Wage costs suffer biggest fall on record at end of last year

Labor costs in Spain suffered their biggest decline at the end of last year when the country slipped back into recession for the second time in four years and unemployment rose to 26 percent, according to National Statistics Institute (INE) figures.

The INE said that after adjusting for seasonal effects and differences in the number of working days, the harmonized index of labor costs per hour declined 3.1 percent in the fourth quarter of last year from a year earlier. There have been only three falls registered in the index since the INE began compiling it and the drop in the final three months of 2012 was the biggest on record. The INE revised the figure for the third quarter to an increase of 0.5 percent from 0.4 percent.

Experts attribute the increase in Spanish exports last year to wage contention. The current account balance -- that is, the balance of operations in goods, services and transfers between Spain and the rest of the world -- has now turned positive. During the previous economic boom, Spain had the world’s largest current account deficit in the world after the United States.

The INE said the biggest falls in costs took place in the public administrations where they dropped 15.9 percent, and in the health and social services where they declined 10.4 percent as a result of the government’s austerity drive, which included salary and job cuts. Costs in education fell 4.0 percent.

By contrast, wage costs in mining and quarrying rose by 10.0 percent and by 9.4 percent in the supply of electricity, gas, steam and air-conditioning.