In Spain, a common perception exists that wages have not recovered from recent crises, yet the reality is complex.

Various segments of the population show different trends in wage evolution.

A key indicator of this disparity is the GINI INDEX, which recorded a decrease in wage inequality to 32.6% in 2023, the lowest level in 14 years.

This shift is attributed to a combination of factors, including strong growth in the wages of lower earners, contrasted with a decline in the purchasing power of top earners.

Ángel Talavera, chief economist for Europe, noted that 2014 marked a significant inflection point in the wage landscape.

The period between 2008 and 2014, characterized by the Great Recession, saw the most substantial losses in purchasing power among lower-income earners.

Conversely, the subsequent period from 2015 to 2023 was generally expansive, aside from a brief setback during the pandemic, with differing policies towards the Minimum Interprofessional Wage (SMI).

Analyzing average gross wage deciles using the Active Population Survey (EPA) and adjusting for inflation, it was observed that the lowest earners (first decile) experienced a 24.5% decrease in real wages between 2008 and 2014, followed by a 27.8% increase from 2015 to 2023. In contrast, the real wage of the top earners (tenth decile) fell only 2.3% during 2008-2014 but incurred a deeper decline of 6.3% between 2015 and 2023. This trend is reinforced when observing the adjacent second and ninth deciles.

Overall, since 2008, real wages have devalued most among the ninth and tenth deciles, falling by 3.1% and 4.6% respectively.

Meanwhile, the second decile, related to the SMI, which ranges between €1,001 and €1,335 in gross income for 2023, has seen a real wage growth of 4.8% since 2008. This increase can be attributed to the significant 80% rise in the minimum wage itself during the period, which outstripped overall wage growth, along with other influencing factors.

Pedro Aznar, a professor in the Department of Economics, Finance and Accounting, highlighted labor shortages in basic occupations as critical for lower wage growth.

The demand for labor surged in sectors like tourism after the pandemic, creating significant upward pressure on wages due to a limited candidate pool.

Wage data adjusted by the general Consumer Price Index (CPI) presents an imperfect approximation of the reality faced by different income strata, as the price differential impacts vary among deciles.

An analysis using a specific CPI for each decile would likely further accentuate existing trends, given that higher-earning classes allocate a larger share of their consumption basket to services, which have seen price increases relative to basic food and clothing, which dominate the budgets of lower-income households.

Economist Miguel Cardoso explained that using a uniform CPI potentially underestimates the purchasing power loss of higher-income households and the improvements for lower-income households.

The reliance on gross wages instead of net wages likewise obscures the relative losses of top earner salaries due to tax policies and exemptions that favor minimum wage earners.

A nuanced understanding of the significant loss in purchasing power among higher earners reveals several contributing factors.

One hypothesis points to compositional effects, with public sector wages declining by 5.2% in real terms from 2008 to 2023, compared to a mere 1.1% drop in the private sector.

This pattern disproportionately affects the upper wage strata, as public sector salaries typically comprise a larger share of higher decile earnings.

Public sector wage freezes post-financial crisis compounded this issue, failing to restore the lost purchasing power adequately.

Data show that several sectors with above-average wages have seen declines in purchasing power since 2008, including information and communications with a 10.1% decline, and financial services and insurance falling by 10.6%.

The trend extends to educational attainment levels, where wages for workers without higher education or with incomplete primary education grew by 17.7% and 16.3% respectively from 2014 to 2023, while those with higher education saw a real wage decrease of 2.4%.

Higher earners are thus experiencing a relatively less favorable wage trajectory, indicating potential diminishing returns on education level amidst ongoing inflationary pressures.

Imposition of non-wage costs, such as increased social contributions resulting from pension reforms, has further constrained salary growth among the highest earners.

Additionally, variable compensation, often tied to economic performance, significantly influences the wages of top decile earners, especially during variable market conditions such as the pandemic.

Data indicates that the latest crises have led to a relative status decline for households relying predominantly on higher salaries.

This shift manifests economically, as private consumption growth has lagged behind GDP since the pandemic, while savings rates have increased.

Notably, high-income earners have exhibited a decreased marginal propensity to consume, as highlighted by recent analyses from central banking institutions.

Meanwhile, lower-income households are less capable of reducing expenditure, focusing chiefly on essential goods, whereas consumption among middle and high-income households has diminished across various non-essential sectors including automobiles, durable goods, and leisure activities.