The consequences of the pandemic in Spain: less purchasing power and more poverty - Spain pandemic consequences reveal increased poverty - The impact of the Covid-19 crisis unleashed in Spain in March 2020 and the restrictions set to prevent contagion has caused the closure of thousands of businesses and has affected the pockets of millions of families in Spain, who have seen how some of their members have lost their jobs or have been affected by a temporary employment regulation (ERTE) file .

The deep recession unleashed by the crisis reduced GDP by 10.8% last year and the battery of measures approved by the Executive did not prevent the gross disposable income of Spanish households from falling by 3.3% in the year as a whole, the largest decline in Europe.

The Government is trying to convey to the public that the recovery is "underway" and will intensify thanks to the arrival of European funds through reforms and investments included in the Recovery, Transformation and Resilience Plan approved last Wednesday by Brussels.

Although since the end of March the economic indicators have begun to pick up thanks to the progress in the vaccination process, greater than expected, and the relaxation of mobility restrictions, the truth is that the ravages of the crisis are still happening and Spaniards continue to suffer a notable loss of purchasing power.

Spain pandemic consequences reveal increased poverty

This is confirmed to Digital Economy by the experts consulted and this is evidenced by the economic indicators that allow a general idea of the evolution of the purchasing power of Spaniards, which far from improving has been deteriorating in recent months by different factors .

The chief economist of BBVA Research for Spain and Portugal, Miguel Cardoso, notes that poverty has “definitely” increased more in Spain as there are more people inactive at work, more than 400,000 workers still under an ERTE partially collecting their salary and a higher percentage of people with lower incomes.

"Inequality has increased", says Cardoso, who explains to Digital Economy that the crisis has particularly affected workers in the service sector, hospitality, self-employed and small businesses.

Spain pandemic consequences reveal increased poverty: Confirms these assertions, the president of the Financial Commission of the General Council of Economists (CGE), Antonio Pedraza, which points to the Digital Economy, the per capita income has grown from an average of around 26.400 euros before the pandemic, to around € 24,000.

To this is added the 462,000 affected by an ERTE, according to the latest data, and the more than 400,000 self-employed in cessation of activity, plus the future affected once the bankruptcy moratorium extended until December ends, Pedraza says,

Despite all this, Cardoso indicates that measures such as ERTE or ICO guarantees have saved a good part of employment and kept thousands of companies alive, so the increase in poverty is lower than in previous crises. According to the Government, the measures adopted have prevented the destruction of 3.5 million jobs and a fall of 25% of GDP .

Spain pandemic consequences reveal increased poverty

Together with the loss of more than 440,000 jobs after a year of pandemic and the compensation damage suffered by the 3.6 million Spaniards who were affected by an ERTE at the peak of the pandemic, the truth is that purchasing power has been more acutely weighed down in recent months by the rise in prices.

In the middle of the debate in the central banks on whether it is necessary to define a more precise inflation target than that of an inflation rate of approximately 2% set by the European Central Bank (ECB), prices in Spain continue to rise and the Spanish shopping basket continues to increase in price coinciding with the beginning of economic reactivation.

In detail, the estimated annual rate of the Consumer Price Index (CPI) in May of this year was 2.7%, accumulating five consecutive months with positive rates and reaching its highest level since February 2017, mainly due to the rise in electricity and electricity. fuels, which anticipates a January slope in the summer months.

Spain pandemic consequences reveal increased poverty: This upward trend in prices has a full impact on the pockets of Spaniards who see how this year they accumulate a loss of purchasing power that exceeds on average 1%, since the increase in prices has far exceeded the rise in their salaries or pensions.

This is the case of pensioners, a group that brings together around 9 million people who have seen their purchasing power reduced in practically two points, since the rise of the CPI of 2.7% leaves far behind the increase of 0.9% of their benefits approved by the Government for this year.

However, the pensioner group, one of the most active when it comes to demanding the revaluation of pensions under the CPI in order precisely to avoid the loss of purchasing power, is not expected to be affected in the medium term by the rise in inflation.

And is that the Executive has already agreed to perform again in 2022, an pay compensation for the lag between the rise in pensions and the rise of inflation, known as ‘paguilla’, which could be the last before the quasi-immediate pension reform to be adopted by the Government shortly once you close the agreement with the social partners.

Spain pandemic consequences reveal increased poverty

This reform guarantees the maintenance of purchasing power by linking the revaluation of pensions with the variation in prices, although it will entail other measures to promote the extension of working life and penalize early retirement.

The compensation for this loss of purchasing power will not reach the collective of about 3.5 million public employees of the administrations, who also saw their salary revalued by 0.9% this year.

The truth is that the group of civil servants has been significantly more affected in terms of the loss of purchasing power than retirees in recent years, since according to the unions, according to the different salary increases they accumulate a decrease of 10%.

This situation is expected to continue as the initial intention of the Government is to continue raising public salaries according to the CPI at least until the year 2024, which could continue to cut their purchasing power.

The loss of purchasing power also affects the rest of employees, at least among workers under a collective agreement, since the wages agreed in the agreement rose on average in April by 1.55% and are now around 1.8%, well below the CPI published by the INE.

In other words, the 4.1 million salaried workers who are covered by these collective agreements have seen their purchasing power reduced by almost one point, in a context in which some of them are still under ERTE, if not ERE.

It should be noted that the labour cost of companies rose by 1% in the first quarter of the year. Within the total cost, the component of salary cost per worker per month, which includes base salary, salary supplements, overtime payments, extraordinary payments and late payments, measured in gross terms,increased by 1% and reached 1,907.82 euros on average.

Spain pandemic consequences reveal increased poverty

In the bullish behavior of prices highlights the rebound of electricity, which has reached record levels coinciding with the entry of the new timetable system, and the rise in fuel prices and fuels, which reaches its highest levels since October 2014, according to data from the Oil Bulletin of the EU.

Cardoso explains to Economía Digital that the most important impact of inflation falls on groups of young people and those with lower incomes, as they are those who allocate most of their budget to food and household expenses.

Pedraza (CGE) also predicts that the issue of rising electricity, gas, oil and fuel will “powerfully” affect the purchasing power of the middle class, heavily influenced by diesel and energy, especially in the summer.

However, the second edition of the Labour Market Yearbook prepared by the Adecco Group Institute showed that, in 2020, real wages fell by 2.7%, as the 3% drop in nominal wages was partly offset by a 0.3% drop in CPI.

This is the largest loss of purchasing power of the average wage in at least 45 years, which in turn caused the purchasing power of the average wage to decline to a level similar to that of 2003.

However, differences were recorded depending on the size of the companies, since while the average gross salary of companies with at least 200 employees remained above 2,000 euros per month in 2020, that of those with less than 50 employees was 1,340 euros.

In addition, larger companies have a greater capacity to resist adversity: the average salary of companies with 200 and more workers decreased by 1% in 2020, that of those with less than 50 workers decreased by 5.9%.

The higher level of wages and the greater resilience of wages in large firms is due to the fact that wages ultimately depend on labour productivity, and hence the structural pattern whereby the level of wages tends to be higher the larger the size of firms.

# Spain pandemic consequences reveal increased poverty #