Wage gap in Spain widens hastening the decline of the middle classes

The salary gap in Spain is getting bigger. While directors saw their remuneration rise by 6.9 percent last year, middle management suffered a fall of 3.8 percent and workers a drop of 0.4 percent.

The figures released Tuesday, in an annual report carried out by Barcelona business school Eada and the consultant ICSA, are further proof of the unraveling of the middle classes, according to the director of the study, Ernest Poveda. “What we’re seeing is a clear polarization trend: with a rise in what directors receive and a fall in the rest — two segments where wages are moving downward to the same level, that is where the trend is one of homogenization, while those who earn the most earn even more.”

The study, which is based on 80,000 interviews, shows that the average salary of directors has been on the rise in spite of the crisis, with the exception of 2009. The average annual gross salary of this group rose from 68,705 euros to 80,330 last year. Workers and middle management saw an increase in what they earn in 2008 and 2009 before experiencing falls thereafter. The average gross salary of middle managers last year was 36,522 euros, and for other employees it was 21,307 euros.

According to Eada teacher and salary expert Jordi Costa, this trend has two possible explanations. The “optimistic” one is that top management was the first to lower their remunerations, cutting their bonuses and maintaining their fixed salaries, and are now the first to raise their remunerations, “which could indicate that the recovery is underway.”

The pessimistic reading is that “companies are focusing their efforts on the remunerations of people who provide more added value.”

The two experts are critical of this polarization development and would like to see a compensation model in which employees who perform better are paid more regardless of where they are on the job ladder. They also suggest introducing ceilings on the highest salaries in relation to the lowest, but note that recent attempts to introduce legislation along these lines — in Switzerland, for example — have floundered.

The study shows that industry is the sector where directors’ salaries have risen the most. It has been the sector with the highest wages since 2007, displacing banks and insurance companies. Finance is the sector with the highest salaries for middle management and workers.

The sector with the poorest pay and where wages have fallen the most are trade and tourism. “We are building a strategic sector with an enormous weight on Spain’s GDP [...] on a very fragile basis,” Poveda said.

The highest salaries for directors and middle management are paid in Madrid and Catalonia, while workers in Navarre have the highest wages followed by Madrid, Catalonia and the Basque Country.