“We have to avoid the second round effect, that this rise in prices ends up permeating the entire economy: salaries, food prices…”, he launched Pedro Sanchez at the start of January after verifying that inflation climbed to the skies, reaching 6.5% in annual rate. According to the criteria of the President of the Government, the runaway CPI for 2021 should in no case have an impact on what workers earn, no matter how much they lose purchasing power and suffer every time they go to the supermarket that ‘silent tax’ that dramatically reduces purchasing power. “What all analysts tell us is that by the middle of this year we will already be seeing a significant reduction in energy prices”, at that time guilty of all the evils in the eyes of the Madrid politician. A CaixaBank report made public this week and more than timely for the interests of the Executive even questioned whether the National Institute of Statistics (INE) properly measures the real impact on the energy price index, all the more reason to avoid temptations. Conclusion? Wages are not raised here. It’s time to endure as legionnaires and if someone suffers to make ends meet, do it willingly and in solidarity with the theses of the tenant of La Moncloa.
Of course, assuming that scenario, it would be expected that the Government would lead by example and apply such rigid principles in its own home. And yet, it is cause for ridicule, ridicule and derision in the different study services in the country, such as the Executive itself, while demanding salary containment for stop at all costs a ‘price-wage spiral’ in the economy on the back of inflation, maintains in the General State Budgets (PGE) an increase of 2% in the salaries of civil servants. Moreover, the cabinet of socialists and purples accumulates salary increases for public employees of more than 7% so far in the legislature. It is ironic, seeing the efforts that Sanchez demands from private companies, that when the rise for administrations in 2022 was announced, even UGT openly criticized it: “It is a new loss of purchasing power that comes on top of the one experienced this year.” Obviously, that 2% increase agreed in the PGE also It will be applied to the remuneration of Sánchez himself and his ministers, after all public charges that will contribute with that rise to entrench the problem even more. Paradoxes of life.
The curious thing about the case is that this departure from orthodoxy when it matters, in this case to please a large contingent of voters such as officials, can blow up the official discourse. Not surprisingly, part of economic theory establishes a ‘correlation effect’ between rising wages in the public and private sectors. In other words, companies tend to imitate the processes of wage formation that administrations anticipate, either due to union pressure or even due to the ‘crowding out’ effect or expulsion towards a well-paid and safe public environment, especially in crisis environments. That is, Sánchez will end up raising the salary of all of us if he continues his courtship of officials. This is confirmed, for example, by a recent working document promoted by the European Central Bank (ECB) and entitled ‘Do public wages in the euro area explain private wage developments? An empirical investigation’. The analysis confirms, after investigating the relationship in France, Spain, Italy, Germany and the Netherlands between 1997 and 2017, that “there is a positive and significant response of private wages to a ‘shock’ in public wages”.
Sánchez is already taking time to freeze the salary of officials and avoid fickleness with pensioners if he is so concerned about the contagion of inflation to the economy
Among the conclusions provided by analysts Maria Grazia Attinasi, Francesco Berardini Y Alessandra Anna Palazzo, it is striking that the phenomenon does not work in the other direction, see that a cut or a freeze in salaries in the public sector does not generate any impact in the private sector. The report works with different econometric models. A first analysis panel detects that an upward variation of 1% in public salaries triggers an increase of 0.2% in a five-year interval, when its impact is maximum in private sector pay. The application of local projection models goes further and even suggests that “in periods of positive growth in public sector wages, the impact on the private sector is far from negligible (0.8% after two years) and is persistent. Also significant is the fact that the effect is felt “statistically significant” in France, Spain and Italy, but not so much in Germany and the Netherlands. This traction is favored by the enormous weight of the public sector in the labor force of the Gallic country -the largest, with up to 25% of the total- and of the Spanish -immediately behind-.
Indeed, the numbers leave little room for doubt. According to the latest Active Population Survey (EPA) made public by the INE, the one relating to the end of 2021, the number of employed persons stood at 20,184,900. Of this volume of workers, 16,709,400 belonged to the private sector and 3,475,000, to the public. If we analyze the last EPA of 2019, before the outbreak of the pandemic and its devastating blow to employment, it is not difficult to notice how, with 19,966,900 total employees, companies welcomed almost the same number of employees as in the last year – 16,713,000-, while the administrations They ‘barely’ had 3,253,300 in their workforce. In other words, the public sector has increased its allocation of resources during the last crisis in more than 220,000 people, fueling its fame as a safety net for governments… if not as a vehicle for political patronage. In fact, and according to the Statistical Bulletin of Personnel at the Service of Public Administrations, prepared by the Treasury, which breaks down the number of personnel by administrations, it is identified that this increase in fat in the public sector has occurred above all for contracts made from the autonomous communities, which have gone from 1,499,304 employees on the payroll in July 2019 to a whopping 1,624,811 in the last available count, see July 2021.
The Bank of Spain warned this week that average inflation will reach 4% in 2022, one point higher than in 2021 and the highest figure in more than a decade. At the same time, the supervisory body that governs Pablo Hernandez de Kos He insisted on the need not to turn the conjunctural into a structural one and to commit to salary moderation. If Sánchez believes what he himself preaches and the most conspicuous analysis services point him out, it takes time to freeze the salary of civil servants and avoid fickleness with other groups -such as pensioners- to avoid that transmission to the economy that worries him so much. Since this possibility seems more like a science-fiction story in an election year, it is worth emphasizing the double standards that the socialist leader and his cohort of ministers use when dealing with the problem of inflation; that is to say, compensations for the niches of related voters and the rest, to make a living. Of course, those who are not lucky at first can always wait for the remains of the feast to arrive through the back door and on a delayed basis. That’s what it takes to make political decisions with a marketing manual in hand.or: start up the machinery, there is no one to control it. Actually, and pardon the sarcasm, it doesn’t seem to matter much as long as we leave the problems to our children and they don’t affect the next elections much. Everything is for the short term. As the classic said, all life is now.