Spain | Double dividend of full employment

Wage and disposable income inequality in Spain illustrates the importance of avoiding its causes by bringing Spain's unemployment rate down and converging it to EU levels, thereby enjoying the double dividend of full employment.

Key points

• Key points:
• In addition to other variables, such as increases in the minimum wage (Spanish SMI), the trend in wages is influenced by the economic cycle, so it is worth comparing the situation in 2022 with the situation in 2007, when the expansion prior to the Great Recession brought the unemployment rate to its lowest level in decades (8.2%).
• Since then, during this 15-year period, wages in the top decile grew by 24% and those in the bottom decile by 37%. In addition, their cyclical behavior was very different. The higher the wage deciles, the lower their sensitivity to unemployment. Wages in the top decile thus fell between 2007 and 2014, while those in the bottom decile kept up an upward trend from 2006 to 2022.
• Spain's inequality is due more to lower incomes in the low-income segments than to higher incomes at the top. Specifically, in the richest 1% of the income distribution, the gap with the EU average increased again to 11%.
• In 2022, Spain was the second country in the EU, after Romania, with the highest rate of early school dropouts. This has been a chronic weakness in the education system for decades. Not surprisingly, inequality of opportunity in educational outcomes leads to inequality in employment, which in turn explains much of the inequality of income.
• Rather than stepping up efforts to mitigate the consequences in terms of inequality with a redistribution of income that is in line with the EU average, the real challenge is to avoid its causes. Education and training policies must address early school dropout rates, and make it possible to take advantage of the digital and energy transition.

Authors

Geographies

Topics

Tags