Spanish unions agree to tie pay to GDP
The historic deal between Spanish union confederations CCOO and UGT and employers’ organisations CEOE and CEPYME that I reported on Touchstone a couple of weeks ago has some interesting features which may show the way for bargainers across Europe (and, if the UK still had significant collective bargaining, here too). In particular, the agreement ties wage increases to overall GDP growth in a way which unions hope will increase employment in a country where youth joblessness has now reached 5 million and youth unemployment is near 50%.
Wage increases have, of course, been decoupled from price increases and productivity over the last ten to thirty years (depending which part of the developed world you live in), which is one reason why inequality has increased, fuelling both the supply and demand side of the ruinous easy credit bubble that led to the global financial and economic crisis. The agreement also exhorts companies to use profits to invest in jobs rather than inflate executive pay or dividends, which has been the other reason for growing inequality.
The deal is therefore a crucial element of getting the Spanish economy – which before the financial crisis had one of the lowest public sector debt to GDP ratios, so was hardly a model of imprudence – back to health. However, the efforts of employers and unions are being undermined by Spanish and external political forces wedded to austerity, rather than growth, as the solution to Spain’s economic woes. While the unions and employers are agreeing flexible responses to the crisis company by company, and strengthening collective bargaining, the right-wing Spanish Government and the European Commission (egged on by German Chancellor Merkel) are demanding widespread labour market deregulation and undermining the social partnership that could get Spain back on track.
CCOO General Secretary Ignacio Fernando Toxo (who as President of the ETUC is playing an increasingly influential role in the development of a new trade union strategy) said of the deal:
“We owed this to society and especially to the more than five million unemployed who demand an effort to achieve growth in economic activity and job creation.”
The agreement moderates both wages and profits distributed by companies, as well as remuneration for senior management. It mandates that age rises should not exceed 0.5% in 2012 or 0.6% in 2013, although at the end of each financial year, wage revision clauses may be adopted taking into account rises in the consumer price index. Then, in 2014, wages should be adjusted so that if growth in GDP in 2013 is lower than 1%, then the wage increase may not exceed 0.6%. If GDP is between 1 and 2%, the wage rise may not be more than 1%, and if GDP in 2013 grows by 2% or more, the wage increase may not exceed 1.5%. Moreover, agreements shall include additional wage revision clauses based on movements in economic markers associated with companies’ progress.
It’s worth reading the detail of the agreement, which could serve as a model for European social dialogue, although the Spanish unions are open that huge levels of unemployment mean that they are negotiating from a position of weakness.