Wage Costs Grow Three Times Higher Than Purchase Prices

Wage costs for entrepreneurs grew in the first quarter of this year three times higher than consumer prices, according to the latest figures on labor costs for companies published by the INE.

The trend reflects how in the first three months of the year, despite forecasts of upward inflation at pre-crisis levels for the whole of this year, the evolution of prices was below the effort made by businessmen in terms of increasing the salary mass of its workers. What supposes, furthermore, that the workers gained in this start-up period of 2021, 1.2% of purchasing power .

Specifically, the figures released this Thursday by the official Statistical Institute show how in the first quarter of the year global labor costs for the employer advanced by 2.4% compared to the same period in 2020.

While the cost corresponding only to Employee salaries increased in this same period by 1.8%. This, taking into account that the average CPI for the first three months of the year stands at 0.6%, means that this increase in wages is up to three times greater than that of consumer prices.

Although, it seems clear according to the forecasts of official bodies that this gain in purchasing power registered in the first quarter of the year will lose firepower in the coming quarters and, beyond that, will be limited at the end of this year when at least the CPI It is expected to climb to 1.6%, according to the Funcas consensus data, but that many entities raise to 2% for 2021 as a whole. a much more moderate gain in purchasing power for workers for the year as a whole: about 0.2 percentage points.

Volatility of recruitment
It should be noted at this point, what was the performance of the labor market in the first months of the year to appreciate the impact on costs for employers, which after this new increase adds 11 consecutive quarters to the rise .

EPA data showed that the number of employed persons decreased by 137,500 people in the first quarter of 2021 compared to the previous quarter (-0.71%), standing at 19,206,800 people. In seasonally adjusted terms, the quarterly variation is 0.49%. By that date, employment had fallen by 474,500 people (-2.41%) in the previous 12 months.

In other words, according to the aggregate data offered by the labor market in the first three months of the year, as a result of the end of the special hiring campaigns for the Christmas holidays, a decline in employment levels with respect to those registered in the same period last year.

However, given that this job destruction occurred in sectors mainly associated with services, the salaries that came out of the salary cost mix coupled with the fact that this same erosion was greater last year, coinciding with the most severe month of confinement, It has caused that despite the departure of workers from the labor market in the first months of the year, the upward path of labor costs for companies in our country has been preserved.

In fact, by sector, if we look at the evolution of the cost of salaries, energy supply was the one that registered the highest year-on-year increase, 19.1%, followed by the extractive industries (+ 17.6%) and information and communications (+ 6%). In contrast, two activities cut their salaries compared to the first quarter of 2020: real estate activities, with a decrease of 7.9%, and hospitality, with a fall of 2.1%.

As explained by Statistics, the evolution of the different sections of activity reflects the degree of impact on the situation derived from the pandemic and the measures implemented to contain it. In fact, the hotel industry is the section of activity most affected by the current situation despite the gradual reopening.

The decrease in the wage cost in this sector has been higher than the number of hours worked in the fourth quarter, resulting in a wage decrease of 2.1% compared to the same quarter of 2020. On the other hand, the payment of part of the Social security contributions and work disabilities, together with the drop in hours worked, cause other costs to show an annual growth of 15.6%.