World Economy

Spain Faces Employment, Better Wage Challenges

Spain Faces Employment, Better Wage ChallengesSpain Faces Employment, Better Wage Challenges

Spain faces challenges to become an economy with high employment and high wages, Alfredo Pastor, Emeritus Professor of Economics at the IESE Business School in Barcelona, told Xinhua in an interview.

Pastor, who was also secretary of state for economy between 1993 and 1995, said that "in the longer term" this would be one of the most important challenges for the current minority government of the Popular Party, whose leader, Mariano Rajoy, was reappointed prime minister on Oct. 29, 2016. Pastor mentioned the economies of northern Europe as an example, stressing that "this is the path we have to follow because with such a high unemployment and low wages, it is impossible to sustain the welfare state we have."

The government announced at the beginning of December an increase of the minimum wage of 8% from €648.6 to €707.6. According to Pastor, the rise has not been enough.

"If you raise it too much, a lot of jobs will be destroyed," he warned, but he pointed out "it has been raised a bit, you have to do it step by step," he said. "This salary does not pay what it costs health and education, let alone, pensions."

Regarding the labor reform, Pastor believes that it has allowed maintaining certain number of jobs thanks to the introduction of flexibility and temporality, which avoids a higher unemployment rate. He noted, however, the existence of a certain "abuse" of the temporality.

"It has been a step in the right path (the labor reform) and repeal would be a step in the wrong direction," he said. According to Pastor, reducing the deficit is not the most urgent thing to do, but "making the economy work properly."

"When the economy works properly, the deficit will fall," he said, while describing as "nonsense" reducing the deficit in the midst of a recession.

Spain is now facing a period in which consensus among the different parties will be key to the adoption of future rules due to parliamentary fragmentation. "We will have to get accustomed to minority governments," said Pastor, who considers it "beneficial" because it leads to consensus.

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