A recent study conducted by Fedea has revealed that the increase in the Minimum Interprofessional Wage (SMI) in Spain in 2019 resulted in a 4.5 percentage point decrease in employment growth among companies where all workers were affected by the wage rise.

The analysis indicates that smaller companies, particularly those with fewer than five employees, experienced the most significant negative impact, as all their workers earned below the established SMI of 900 euros, which represented a 22.3% hike.

The research, presented by Marcel Jansen from the Autonomous University of Madrid, indicates that while the overall employment growth rate was approximately 3%, the average decline in growth ranged from 0.5 to 1 percentage point across all affected firms.

The effects of this decrease diminished as company size increased, leading to an 'insignificant' effect on employment within companies employing more than 50 individuals.

The SMI increase affected 21% of establishments, equating to one in five companies employing at least one worker earning below the previous minimum wage.

In medium-sized enterprises, the wage increase impacted half of the workforce, whereas only 2% of employees in larger companies, those with over 250 workers, were affected by the change.

Notably, the study finds that almost 40% of potential gains from raising the minimum wage were offset by adjustments in workforce size.

Employees working in firms highly impacted by the SMI increase saw a decline of 5.6 percentage points in job opportunities.

Furthermore, the wage increase did not result in improved job quality for displaced employees during the subsequent 12 months.

Despite raising salaries by an average of 11.4 percentage points in firms where all workers were affected, the increase showed a progressive decline depending on the level of impact—5.7 percentage points in firms with half their workforce affected by the minimum wage hike.

Regarding future policies, Jansen has cautioned against the proposed legislation to set the SMI at 60% of average wages, suggesting that such a rigid framework may limit necessary adjustments to respond to market changes.

He highlighted potential detrimental effects, particularly in the event of an economic downturn, questioning the sustainability of fixed minimum wages amid fluctuating economic conditions.

Additionally, he noted that continuous increases in the SMI since 2018 have led to wage rigidity, as salaries gravitate towards the minimum wage threshold, which may adversely affect employment levels during recessionary periods.

Jansen proposed the introduction of age or profile-based minimum wages, similar to policies in countries such as Germany, which could provide a differentiated approach to wage setting for less experienced or younger workers.

Lastly, he advocated for the establishment of a commission of experts to oversee adjustments to the SMI based on economic conditions, ensuring improved data management to facilitate informed decision-making in wage policy.