Business forum sees Spanish labor costs falling further

The Business Council for Competitiveness, a forum that groups together the 15 biggest companies in Spain, on Thursday predicted that Spanish unit labor costs — the labor cost per unit of output — are set to fall 1.5 percent over the course of this year and the next, compared with an average rise in comparable countries such as Germany, France and Italy of 2.9 percent.

The forecast included in a report issued Thursday came a day after Finance Minister Cristóbal Montoro — in defiance of official figures saying the contrary — stated in Congress that wages in Spain are not going down.

“Salaries are not falling, they’re only moderating their growth,” Montoro said. “It’s not the same to fall as to moderately grow.”

Businessman Josep Piqué, a former Cabinet colleague of Montoro in the conservative Popular Party government of Prime Minister Jose María Aznar, also naysaid the finance minister on Thursday.

Export growth has been strong in Spain of late, largely as a result of falling payrolls

While expressing his “personal and professional admiration” for Montoro, Piqué, who was recently named deputy chairman and chief executive officer of Spanish builder OHL, said it was “obvious” that real wages (after taking into account the impact of inflation) have been falling in Spain for years.

Montoro’s argument was based on collective bargaining agreement figures compiled by the Labor Ministry, which showed that salaries rose an average 0.56 percent in the first nine months of the year. Since the introduction of the euro, inflation in Spain has averaged around 3 percent, well above the average in the euro zone.

“It’s true that we economists can view reality from many points of view and that’s why we often get things wrong,” said Piqué, who was foreign minister in the Aznar administration. “It is true that in terms of collective agreements signed this year, there may have been a very modest increase in wages, but it is obvious that real salaries have been falling in Spain for years.”

The government last month approved a bill decoupling annual revaluations of items such as wages and rent from the consumer price index (CPI), a process known as deindexation.

While acknowledging that wage cuts are regrettable for the individual, they are essential in order to boost competitiveness in Spain. Export growth has been strong in Spain of late, largely as a result of falling payrolls, a process known as internal devaluation, which the IMF has urged Spain to continue.

In its report issued Thursday, the Business Council for Competiveness forecast that average labor costs per employee in Spain in 2014 would be between 12 and 30 percent below the 43,000 euros in Germany, France and Italy.

The forum improved its forecast for the economy as a whole, estimating that Spain had emerged from its longest recession in close to half a century in the third quarter of this year, with a rise in GDP of 0.1 percent. It predicted output would grow by 0.9 percent in 2004, compared with a government forecast of a rise of 0.7 percent. The IMF sees growth of only 0.2 percent.

The chairman of the forum, César Alierta, who is also chairman of telecoms giant Telefónica, predicted “sustained growth over the next few years.”

The forum also forecast that the gross operating profit of Spanish companies would grow by 6.7 percent over the course of the next two years, compared with a rise of 1.5 percent for companies in Germany, France and Italy.