UGT demands minimum wage hike to combat inflation

UGT’s push for an immediate SMI increase and the antiestéticar of rising inflation

A worker with three years of seniority earning just €50 above the minimum wage is already being overtaken by newcomers. They are not alone. Nearly one in six employees in Spain earns the minimum wage, currently set at €1,332 net per month paid over 12 installments. When UGT demands an immediate raise to fight inflation, it is not referring to a marginal group: it is talking about the foundation of the labor market.

The SMI and inflation: a double-edged sword

The union logic is simple: if prices rise, the minimum wage must rise to preserve purchasing power. However, critical economists warn that increasing the SMI also pushes up business costs, which are passed on to consumers. This creates a spiral that some consider unstable. Here appears the familiar specter: the feedback loop between wages and prices. It is not a new debate, but the urgency UGT brings to the table reactivates it.

Those who reject the remedy: excess labor supply

Another current goes further: the problem is not the minimum wage, but the millions of people who have entered the labor market in the last five years. An excess labor supply keeps wages low and, paradoxically, stimulates demand for basic goods. According to this analysis, raising the SMI would correct nothing and would leave those earning slightly more in a relatively worse position. A worker earning €50 above the minimum would be overtaken by any new entrant.

The European mirror: €2,200 seems like a luxury here

In parts of Eastern Europe, €2,200 net per month (paid over 12 installments) is considered a normal salary. In Germany, France, or the Netherlands, it is close to the minimum wage. Here, exceeding that figure is celebrated as a success. The comparison is not gratuitous: it serves to gauge how far we have come and how much remains. Those defending an immediate SMI increase argue it is only a first step. Those attacking it say it is not the right step.

Income tax (IRPF): the great forgotten issue

While unions clamor for the SMI, income tax brackets (IRPF) have remained untouched for a decade. The consequence: any wage increase is eaten up by Hacienda (the Spanish Tax Agency) through higher marginal rates. It does little good if the minimum wage rises while the worker ends up paying more taxes and losing purchasing power. That is the recurring complaint from those who do not earn the minimum wage and see their effort diluted. The debate is not just about how much to raise the minimum: it is about whether the tax system supports real income growth.

And finally, the data speaks for itself: the minimum wage itself is not subject to IRPF withholding at lower levels, but as wages rise into taxable brackets, the burden increases. So, raising the SMI without adjusting tax thresholds shifts the problem rather than solving it.